##### Table of Contents



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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q/A

Amendment No. 1 to

(Mark One)

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended September 30, 2002

OR

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from ____ to ____

Commission File Number 0-30791

eFunds Corporation

(Exact name of registrant as specified in its charter)


|                                                                                                                |  |                                                
|--------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of incorporation or organization)                                         |  | 39-1506286
(IRS Employer Identification Number)
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|                                                                                                               
|Gainey Center II
8501 N. Scottsdale Road, Suite 300
Scottsdale, Arizona
Address of principal executive offices) |  | 85253
(Zip Code)                               

Registrants telephone number, including area code: (480) 629-7700

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes   [   ]   No   þ

The number of shares outstanding of the registrants common stock, par value $.01 per share, at November 7,
2002 was 46,666,388.

This Form 10-Q/A is filed to amend the Companys Quarterly Report on Form 10-Q for the quarter ended September
30, 2002 to include the financial statement information that could not be included in that Report at the time of its
filing.



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TABLE OF CONTENTS



|                               |                                                                                                |  |  |  |  |  |  | 
|------------------------------ | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I - FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                                                                  
|                               | ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
|                               | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            
|                               | ITEM 4. CONTROLS AND PROCEDURES                                                               
|PART II - OTHER INFORMATION   
|                               | ITEM 1. LEGAL PROCEEDINGS                                                                     
|                               | ITEM 5. OTHER INFORMATION                                                                     
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                      
|SIGNATURES                    
|CERTIFICATIONS                
|EX-99.1                       
|EX-99.2                       



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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

eFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |         |              |         | 
|------------------------------------------------- | ---------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------- | ------- | -------------- | ------- | ------------ | ------- | 
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |         | December 31,
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |         | 2001        
|                                                  |                                                      |                                                                                                                                                                  |                                            |         | September 30, |         | (As Restated -
|                                                  |                                                      |                                                                                                                                                                  |                                            |         | 2002          |         | See Note
13)  
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |               
|(dollars in thousands)                            |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                 
|                                                 
|                                                 
|                                                 
|Current assets:                                   |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Cash and cash equivalents                            |                                                                                                                                                                  | $                                          | 106,904 |               |         | $              | 101,871 |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Deposits subject to compensating balance arrangement |                                                                                                                                                                  |                                            | 3,844   |               |         |                | 2,448   |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Restricted custodial cash                            |                                                                                                                                                                  |                                            | 5,172   |               |         |                | 1,124   |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accounts receivable  net                            |                                                                                                                                                                  |                                            | 69,253  |               |         |                | 78,488  |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Deferred income taxes                                |                                                                                                                                                                  |                                            | 12,041  |               |         |                | 13,492  |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Prepaid expenses and other current assets            |                                                                                                                                                                  |                                            | 16,530  |               |         |                | 14,364  |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Assets held for sale                                 |                                                                                                                                                                  |                                            | 13,310  |               |         |                |        |             
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                  |                                                      | Total current assets                                                                                                                                             |                                            |         | 227,054       |         |                |         | 211,787      |        
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|Property and equipment  net                      |                                                      |                                                                                                                                                                  | 52,509                                     |         |               |         | 75,638         |        
|                                                 
|                                                 
|                                                 
|                                                 
|Long-term investments                             |                                                      |                                                                                                                                                                  | 3,758                                      |         |               |         | 2,747          |        
|                                                 
|                                                 
|                                                 
|                                                 
|Intangibles:                                      |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Goodwill                                             |                                                                                                                                                                  |                                            | 111,909 |               |         |                | 87,151  |             
|                                                  | Other intangible assets  net                        |                                                                                                                                                                  |                                            | 63,574  |               |         |                | 60,432  |             
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                      |                                                                                                                                                                  | Total intangibles  net                    |         |               | 175,483 |                |         |              | 147,583 | 
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                  | Other non-current assets                             |                                                                                                                                                                  |                                            | 4,263   |               |         |                | 5,161   |             
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                  |                                                      | Total non-current assets                                                                                                                                         |                                            |         | 236,013       |         |                |         | 231,129      |        
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                  |                                                      |                                                                                                                                                                  | Total assets                               |         | $             | 463,067 |                |         | $            | 442,916 | 
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|Current liabilities:                              |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accounts payable                                     |                                                                                                                                                                  | $                                          | 34,998  |               |         | $              | 25,511  |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accrued liabilities                                  |                                                                                                                                                                  |                                            | 36,808  |               |         |                | 36,565  |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accrued contract losses                              |                                                                                                                                                                  |                                            | 8,470   |               |         |                | 14,777  |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Deferred revenue                                     |                                                                                                                                                                  |                                            | 6,879   |               |         |                | 14,377  |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Long-term debt due within one year                   |                                                                                                                                                                  |                                            | 1,866   |               |         |                | 2,781   |             
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                  |                                                      | Total current liabilities                                                                                                                                        |                                            |         | 89,021        |         |                |         | 94,011       |        
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|Long-term debt                                    |                                                      |                                                                                                                                                                  | 1,430                                      |         |               |         | 2,529          |        
|                                                 
|                                                 
|                                                 
|                                                 
|Deferred income taxes                             |                                                      |                                                                                                                                                                  | 8,279                                      |         |               |         | 7,313          |        
|                                                 
|                                                 
|                                                 
|                                                 
|Other long-term liabilities                       |                                                      |                                                                                                                                                                  | 3,479                                      |         |               |         | 4,748          |        
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                  | Total liabilities                                    |                                                                                                                                                                  |                                            | 102,209 |               |         |                | 108,601 |             
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|Commitments and contingencies (Notes 4, 8 and 12) |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                  | Stockholders equity:                                |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                      | Preferred stock $.01 par value; 100,000,000 shares authorized; no shares
issued and outstanding                                                                  |                                            |        |               |         |                |        |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                      | Common stock $.01 par value; authorized: 250,000,000 shares; issued and
outstanding: 46,667,203 shares at September 30, 2002 and 46,379,841 at
December 31, 2001 |                                            | 466     |               |         |                | 464     |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                      | Additional paid-in capital                                                                                                                                       |                                            | 409,982 |               |         |                | 407,210 |             
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                      | Accumulated deficit                                                                                                                                              |                                            | (47,372 | )             |         |                | (71,049 | )           
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                                                      | Accumulated other comprehensive loss                                                                                                                             |                                            | (2,218  | )             |         |                | (2,310  | )           
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                  |                                                      |                                                                                                                                                                  | Stockholders equity                       |         | 360,858       |         |                |         | 334,315      |        
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        
|                                                  |                                                      |                                                                                                                                                                  | Total liabilities and stockholders equity |         | $             | 463,067 |                |         | $            | 442,916 | 
|                                                  |                                                      |                                                                                                                                                                  |                                            |         |               |         |                |        



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| |  | See Notes to Condensed Consolidated Financial Statements
| |  | --------------------------------------------------------

2



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##### Table of Contents



eFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

|                                         |                                                                   |                          |         |                                  |         |                                 |         |                                |         |   |         |         |         |   |         |         |         | 
|---------------------------------------- | ----------------------------------------------------------------- | ------------------------ | ------- | -------------------------------- | ------- | ------------------------------- | ------- | ------------------------------ | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                         |                                                                   |                          |         | Three Months Ended September 30, |         | Nine Months Ended September 30,
|                                         |                                                                   |                          |         |                                  |         |                                
|(in thousands, except per share amounts) |                                                                   | 2002                     |         | 2001(As Restated -See Note
13)   |         | 2002                            |         | 2001(As Restated -See Note
13)
|                                         |                                                                   |                          |         |                                  |         |                                 |         |                               
|Net revenue                              |                                                                   | $                        | 143,995 |                                  |         | $                               | 141,275 |                                |         | $ | 411,463 |         |         | $ | 399,034 |        
|                                        
|                                        
|                                        
|                                        
|Operating expenses:                      |                                                                   |                          |         |                                  |         |                                 |         |                                |         |   |         |         |         |   |         |        
|                                        
|                                        
|                                        
|                                        
|                                         | Processing, communication, and service costs                      |                          |         | 63,041                           |         |                                 |         | 50,692                         |         |   |         | 166,939 |         |   |         | 147,648 |        
|                                        
|                                        
|                                        
|                                        
|                                         | Employee costs                                                    |                          |         | 42,658                           |         |                                 |         | 51,478                         |         |   |         | 139,375 |         |   |         | 157,058 |        
|                                        
|                                        
|                                        
|                                        
|                                         | Depreciation and amortization                                     |                          |         | 9,083                            |         |                                 |         | 10,266                         |         |   |         | 28,326  |         |   |         | 30,340  |        
|                                        
|                                        
|                                        
|                                        
|                                         | Other operating costs                                             |                          |         | 9,644                            |         |                                 |         | 9,530                          |         |   |         | 28,837  |         |   |         | 29,750  |        
|                                        
|                                        
|                                        
|                                        
|                                         | Restructuring and asset impairment charges                        |                          |         | 6,079                            |         |                                 |         |                               |         |   |         | 16,525  |         |   |         | 3,200   |        
|                                        
|                                        
|                                        
|                                        
|                                         | Reversal
of provision for contract losses                         |                          |         | (2,000                           | )       |                                 |         | (2,500                         | )       |   |         | (2,000  | )       |   |         | (2,500  | )      
|                                         |                                                                   |                          |         |                                  |         |                                 |         |                                |         |   |         |         |         |   |         |        
|                                         |                                                                   | Total operating expenses |         |                                  | 128,505 |                                 |         |                                | 119,466 |   |         |         | 378,002 |   |         |         | 365,496 | 
|                                         |                                                                   |                          |         |                                  |         |                                 |         |                                |         |   |         |         |         |   |         |        
|Income from operations                   |                                                                   |                          | 15,490  |                                  |         |                                 | 21,809  |                                |         |   | 33,461  |         |         |   | 33,538  |        
|                                        
|                                        
|                                        
|                                        
|Other income (expense)  net             |                                                                   |                          | (233    | )                                |         |                                 | (262    | )                              |         |   | 372     |         |         |   | 553     |        
|                                         |                                                                   |                          |         |                                  |         |                                 |         |                                |         |   |         |         |         |   |         |        
|Income before income taxes               |                                                                   |                          | 15,257  |                                  |         |                                 | 21,547  |                                |         |   | 33,833  |         |         |   | 34,091  |        
|                                        
|                                        
|                                        
|                                        
|Provision for income taxes               |                                                                   |                          | (4,586  | )                                |         |                                 | (7,798  | )                              |         |   | (10,160 | )       |         |   | (12,421 | )      
|                                         |                                                                   |                          |         |                                  |         |                                 |         |                                |         |   |         |         |         |   |         |        
|Net income                               |                                                                   | $                        | 10,671  |                                  |         | $                               | 13,749  |                                |         | $ | 23,673  |         |         | $ | 21,670  |        
|                                         |                                                                   |                          |         |                                  |         |                                 |         |                                |         |   |         |         |         |   |         |        
|Weighted average shares outstanding      |                                                                   |                          | 46,630  |                                  |         |                                 | 46,248  |                                |         |   | 46,561  |         |         |   | 45,850  |        
|                                         |                                                                   |                          |         |                                  |         |                                 |         |                                |         |   |         |         |         |   |         |        
|                                         | Weighted average shares and potential dilutive
shares outstanding |                          |         | 46,644                           |         |                                 |         | 48,030                         |         |   |         | 46,861  |         |   |         | 47,525  |        
|                                         |                                                                   |                          |         |                                  |         |                                 |         |                                |         |   |         |         |         |   |         |        
|Net income per share  basic             |                                                                   | $                        | 0.23    |                                  |         | $                               | 0.30    |                                |         | $ | 0.51    |         |         | $ | 0.47    |        
|                                         |                                                                   |                          |         |                                  |         |                                 |         |                                |         |   |         |         |         |   |         |        
|Net income per share  diluted           |                                                                   | $                        | 0.23    |                                  |         | $                               | 0.29    |                                |         | $ | 0.51    |         |         | $ | 0.46    |        
|                                         |                                                                   |                          |         |                                  |         |                                 |         |                                |         |   |         |         |         |   |         |        



---

| |  | See Notes to Condensed Consolidated Financial Statements
| |  | --------------------------------------------------------

3



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##### Table of Contents



eFUNDS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                   |                                                                                   |                                                                       |                              |                                           |        |                   |         |         |        |                |         |  
|-------------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ---------------------------- | ----------------------------------------- | ------ | ----------------- | ------- | ------- | ------ | -------------- | ------- | -
|                                                   |                                                                                   |                                                                       |                              |                                           |        | Nine Months Ended
|                                                   |                                                                                   |                                                                       |                              |                                           |        | September 30,    
|                                                   |                                                                                   |                                                                       |                              |                                           |        |                  
|                                                   |                                                                                   |                                                                       |                              |                                           |        |                   |         |         |        | 2001          
|                                                   |                                                                                   |                                                                       |                              |                                           |        |                   |         |         |        | (As Restated -
|(in thousands)                                     |                                                                                   | 2002                                                                  |                              | See Note 13)                             
|                                                   |                                                                                   |                                                                       |                              |                                          
|Cash flows from operating activities:              |                                                                                   |                                                                       |                              |                                           |        |                   |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net income                                                                        |                                                                       | $                            | 23,673                                    |        |                   | $       | 21,670  |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Adjustments to reconcile net income to net cash provided by operating activities: |                                                                       |                              |                                           |        |                   |         |         |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Depreciation                                                          |                              |                                           | 13,918 |                   |         |         | 13,979 |               
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Amortization of intangibles                                           |                              |                                           | 14,408 |                   |         |         | 16,361 |               
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Loss on impairment or disposal of property, equipment and intangibles |                              |                                           | 8,249  |                   |         |         | 268    |               
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Equity
in loss of investee                                            |                              |                                           |       |                   |         |         | 176    |               
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Deferred income taxes                                                 |                              |                                           | 2,417  |                   |         |         | (2,175 | )             
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   | Changes in assets and liabilities:                                    |                              |                                           |        |                   |         |         |        |               
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   |                                                                       | Restricted cash              |                                           |        | (5,444            | )       |         |        | 9,233          |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   |                                                                       | Accounts receivable          |                                           |        | 9,235             |         |         |        | (41,731        | )      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   |                                                                       | Accounts payable             |                                           |        | 9,487             |         |         |        | (4,046         | )      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   |                                                                       | Accrued contract losses      |                                           |        | (6,307            | )       |         |        | (6,702         | )      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                                   |                                                                       | Other assets and liabilities |                                           |        | (12,231           | )       |         |        | 12,238         |        
|                                                   |                                                                                   |                                                                       |                              |                                           |        |                   |         |        
|                                                   |                                                                                   |                                                                       |                              | Net cash provided by operating activities |        |                   | 57,405  |         |        |                | 19,271  |  
|                                                   |                                                                                   |                                                                       |                              |                                           |        |                   |         |         |       
|Cash flows from investing activities:              |                                                                                   |                                                                       |                              |                                           |        |                   |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Capital expenditures                                                              |                                                                       |                              | (17,805                                   | )      |                   |         | (22,327 | )     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Acquisitions                                                                      |                                                                       |                              | (35,184                                   | )      |                   |         |        |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash paid for investments                                                         |                                                                       |                              |                                          |        |                   |         | (1,129  | )     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other                                                                             |                                                                       |                              | 141                                       |        |                   |         |        |       
|                                                   |                                                                                   |                                                                       |                              |                                           |        |                   |         |         |       
|                                                   |                                                                                   |                                                                       |                              | Net cash used in investing activities     |        |                   | (52,848 | )       |        |                | (23,456 | )
|                                                   |                                                                                   |                                                                       |                              |                                           |        |                   |         |         |       
|Cash flows from financing activities:              |                                                                                   |                                                                       |                              |                                           |        |                   |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Repayments on line of credit                                                      |                                                                       |                              |                                          |        |                   |         | (5,303  | )     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Payments on long-term debt                                                        |                                                                       |                              | (2,298                                    | )      |                   |         | (1,658  | )     
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Release of loan guarantee collateral                                              |                                                                       |                              |                                          |        |                   |         | 8,500   |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Issuance of common stock                                                          |                                                                       |                              | 2,774                                     |        |                   |         | 9,780   |       
|                                                   |                                                                                   |                                                                       |                              |                                           |        |                   |         |         |       
|                                                   |                                                                                   |                                                                       |                              | Net cash provided by financing activities |        |                   | 476     |         |        |                | 11,319  |  
|                                                   |                                                                                   |                                                                       |                              |                                           |        |                   |         |         |       
|Net increase in cash and cash equivalents          |                                                                                   |                                                                       | 5,033                        |                                           |        |                   | 7,134   |        
|                                                  
|                                                  
|                                                  
|                                                  
|Cash and cash equivalents at beginning of period   |                                                                                   |                                                                       | 101,871                      |                                           |        |                   | 78,731  |        
|                                                   |                                                                                   |                                                                       |                              |                                           |        |                   |         |         |       
|Cash and cash equivalents at end of period         |                                                                                   | $                                                                     | 106,904                      |                                           |        | $                 | 85,865  |        
|                                                   |                                                                                   |                                                                       |                              |                                           |        |                   |         |         |       
|Supplemental Disclosures of Cash Flow Information: |                                                                                   |                                                                       |                              |                                           |        |                   |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash paid for income taxes                                                        |                                                                       | $                            | 3,876                                     |        |                   | $       | 3,575   |       
|                                                   |                                                                                   |                                                                       |                              |                                           |        |                   |         |         |       



---

| |  | See Notes to Condensed Consolidated Financial Statements
| |  | --------------------------------------------------------

4



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##### Table of Contents



eFUNDS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1  The Company:

eFunds Corporation and its wholly-owned subsidiaries (the Company) provide
transaction processing, risk management and professional services to financial
institutions, retailers, electronic funds transfer networks, e-commerce
providers and government agencies. The Company has four operating segments:
Electronic Payments; Automated Teller Machine (ATM) Management Services;
Decision Support and Risk Management; and Professional Services. The Electronic
Payments segment provides automated clearinghouse (ACH), point of sale (POS),
electronic funds transfer (EFT) and other processing services across multiple
financial networks and electronic benefit transfer (EBT) services for
government agencies. The ATM Management Services segment provides ATM
deployment, management and branding services. The Decision Support and Risk
Management segment provides risk management based data and other products to
financial institutions, retailers and other businesses that assist in detecting
fraud and assessing the risk of opening a new account or accepting a check. The
Professional Services segment provides EFT software sales, software
applications development, maintenance and installation, and business process
outsourcing services.

The Company was incorporated in Delaware in December 1984 and changed its name
from Deluxe Electronic Payment Systems, Inc. to eFunds Corporation in September
1999. Previously a wholly-owned subsidiary of Deluxe Corporation (Deluxe),
the Company completed its initial public offering (the IPO) in June 2000,
issuing 5.5 million shares of common stock at $13.00 per share for $64.5
million, net of offering expenses. In December 2000, Deluxe distributed all of
its remaining shares of the Companys common stock to its shareholders through
a spin-off transaction.

Note 2  Consolidation and Basis of Presentation:

The accompanying condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated. Investments in
unconsolidated affiliated companies, included in Long-term investments, are
accounted for under the cost method. The consolidated financial statements
should be read in conjunction with the Companys 2001 Amended Annual Report on
Form 10-K/A as filed with the Securities and Exchange Commission. In the
opinion of management, the accompanying financial information includes all
adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position, results of
operations and cash flows for the interim periods presented. The results of
operations and cash flows for the interim periods presented are not necessarily
indicative of the results of any future period.

Recent Accounting Pronouncement

In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement requires the
recording of costs associated with exit or disposal activities at their fair
values at the time a liability is incurred and it eliminates the definition and
requirements for recognition of exit costs in Emerging Issues Task Force
(EITF) Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). Under EITF Issue No. 94-3, a liability for
an exit cost was generally recognized at the date of an entitys commitment to
an exit plan, which may have been before an actual liability arose. The
provisions of SFAS No. 146 are effective for exit or disposal activities that
are initiated after December 31, 2002. The Company is assessing what impact, if
any, this statement will have on its consolidated balance sheet and statement
of operations.

Note 3  Accounting Change:

In January 2002, the Emerging Issues Task Force (EITF) issued EITF Issue No.
01-14, Income Statement Characterization of Reimbursements Received for
Out-of-Pocket Expenses Incurred (formerly EITF Abstracts, Topic No. D-103).
This EITF requires that reimbursements received for out-of-pocket expenses
should be classified as revenue and is effective for financial reporting
periods beginning after December 15, 2001. EITF Issue No. 01-14 requires that
financial statements for prior periods presented be reclassified to comply with
these provisions. The Company typically incurs telecommunications, network
customer fees, travel, maintenance and repair, and other transaction costs that
are billed to and reimbursed by customers. These reimbursements were
previously classified as a reduction in operating expenses. The effect of the
Companys adoption of EITF Issue No. 01-14 was an increase in net revenue and
operating expenses of $7.6 million and $7.4 million for the quarters ended
September 30, 2002 and 2001, respectively, and $22.2 million and $20.3 million
for the nine months ended September 30, 2002 and 2001, respectively, with no
effect on the Companys financial position or net income.

5



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##### Table of Contents



Note 4  Acquisitions:

On January 31, 2002, the Company purchased substantially all of the ATM-related
assets of Hanco Systems, Inc. (Hanco), an independent ATM deployment and
management company. Hanco managed a network of approximately 2,500 ATMs in 30
states. Effective May 1, 2002, the Company purchased Samsar ATM Company, Inc.
(Samsar), a Seattle-based provider of ATM services which managed an ATM
network of more than 1,000 ATMs in the northwest United States. Effective June
1, 2002, the Company purchased Evergreen Teller Services, Inc. (Evergreen), a
California-based provider of ATM services for more than 1,600 ATMs located
throughout California and the northwest United States. Effective August 1,
2002, the Company purchased the ATM-related assets of Cash Resources, Inc.
(CRI), a Colorado based provider of ATM services for more than 2,800 ATMs
located mostly in the western half of the United States. The operating results
of Hanco, Samsar, Evergreen and CRI have been included in the Companys
consolidated financial statements since the date of each purchase. The Company
currently manages a network of approximately 16,800 ATM machines.

The total purchase price of these acquisitions was approximately $39.4 million
of which approximately $35.2 million was paid in cash. Payment of approximately
$2.4 million of the purchase price is subject to satisfaction of certain
post-closing conditions. The purchase price was allocated to the assets and
liabilities of the acquired companies and the unallocated portion of the
purchase price was recorded as goodwill. The following table summarizes the
estimated fair value of assets acquired and liabilities assumed at the date of
each acquisition. Of the $10.6 million of intangible assets, $9.4 million was
assigned to customer contracts and $1.2 million was assigned to non-compete
agreements.

|                       |                       |   |        |        | 
|---------------------- | --------------------- | - | ------ | ------ | 
|(in thousands)         |                       |   |        |       
|                      
|                      
|                      
|                      
|Current assets         |                       | $ | 1,784  |       
|                      
|                      
|                      
|                      
|Property and equipment |                       |   | 1,085  |       
|                      
|                      
|                      
|                      
|Intangible assets      |                       |   | 10,562 |       
|                      
|                      
|                      
|                      
|Goodwill               |                       |   | 23,387 |       
|                      
|                      
|                      
|                      
|Other assets           |                       |   | 100    |       
|                       |                       |   |        |       
|                       | Total assets acquired |   |        | 36,918 | 
|                       |                       |   |        |       
|Current liabilities    |                       |   | 1,734  |       
|                       |                       |   |        |       
|                       | Net assets acquired   |   | $      | 35,184 | 
|                       |                       |   |        |       

In March 2000, the Company paid cash of $20.0 million for an approximate 24%
interest in Access Cash International L.L.C., a Delaware limited liability
company (ACI). ACI was the second largest independent provider of ATM services
in the United States. ACI provided turnkey ATM deployment solutions, including
ATM sales and management activities, as well as branding and advertising
services. The Company accounted for this initial investment under the equity
method of accounting, which requires that an investor record its share of the
losses relating to its ownership interest. Accordingly, the Companys results
of operations for the period from January 1, 2001 to September 30, 2001 include
its 24% share of the results of operations of ACI. The difference of $20.0
million between the amount of the investment and the underlying equity in the
net assets of ACI was being amortized over 15 years and the amortization was
included in other income-net. Effective October 1, 2001, the Company acquired
the remaining approximately 76% equity interest in ACI. The final acquisition
was accounted for as a purchase in accordance with the provisions of SFAS No.
141, Business Combinations. As a result of the acquisition of the remaining
equity interest in ACI, the Company consolidated ACIs results of operations
with its own, as ACI was a wholly-owned subsidiary from the date of acquisition
forward.

The purchase price (Purchase Price) of the remaining 76% of ACI was $44.6
million, of which approximately $40.3 million was paid in cash on or prior to
the closing date of the acquisition. Payment of the balance of approximately
$4.3 million is subject to the satisfaction of certain post-closing conditions.
If these conditions are resolved such that the Company is required to pay any
portion of the balance of the Purchase Price, such payments will be accounted
for as an increase to goodwill. The Purchase Price was determined by
negotiation between the parties and resulted in the recognition of goodwill as
that price exceeded the estimated fair values of identifiable assets and
liabilities and intangible assets with finite useful lives.

6



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##### Table of Contents



The following table summarizes the unaudited pro forma results of operations of
the Company as though the acquisitions of Hanco, Samsar, Evergreen, CRI and ACI
had occurred at the beginning of each period presented:

|                                         |         |      |                                  |      |                                 |      |         |      |  |   |         |      |  |   |         |      | 
|---------------------------------------- | ------- | ---- | -------------------------------- | ---- | ------------------------------- | ---- | ------- | ---- |  | - | ------- | ---- |  | - | ------- | ---- | 
|                                         |         |      | Three Months Ended September 30, |      | Nine Months Ended September 30,
|                                         |         |      |                                  |      |                                
|(in thousands, except per share amounts) |         | 2002 |                                  | 2001 |                                 | 2002 |         | 2001
|                                         |         |      |                                  |     
|Revenue                                  |         | $    | 146,651                          |      |                                 | $    | 155,708 |      |  | $ | 433,508 |      |  | $ | 439,439 |     
|                                        
|                                        
|                                        
|                                        
|Net income                               |         |      | 10,712                           |      |                                 |      | 12,294  |      |  |   | 23,729  |      |  |   | 17,898  |     
|                                        
|                                        
|                                        
|                                        
|Net income per share:                    |         |      |                                  |      |                                 |      |         |      |  |   |         |      |  |   |         |     
|                                        
|                                        
|                                        
|                                        
|                                         | Basic   |      |                                  | 0.23 |                                 |      |         | 0.27 |  |   |         | 0.51 |  |   |         | 0.39 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Diluted |      |                                  | 0.23 |                                 |      |         | 0.26 |  |   |         | 0.51 |  |   |         | 0.38 | 

Note 5  Goodwill and Other Intangible Assets:

Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Intangible Assets(SFAS 142) which was issued by the Financial Accounting
Standards Board in June 2001. SFAS No. 142 prohibits the amortization of goodwill
and intangible assets with indefinite useful lives and requires that these
assets be tested for impairment at least annually. The Company has completed
its transitional impairment test for goodwill and intangible assets with
indefinite useful lives and has determined that no impairment exists. The
following table reconciles the net income and earnings per share the Company
reported for the three and nine month periods ended September 30, 2001 to
exclude historical goodwill and related tax effects:

|                                                         |         |      |               |      |               |   |        |      | 
|-------------------------------------------------------- | ------- | ---- | ------------- | ---- | ------------- | - | ------ | ---- | 
|                                                         |         |      | Three Months  |      | Nine Months  
|                                                         |         |      | Ended         |      | Ended        
|                                                         |         |      | September 30, |      | September 30,
|(in thousands, except per share amounts)                 |         | 2001 |               | 2001
|                                                         |         |      |               |     
|Reported net income                                      |         | $    | 13,749        |      |               | $ | 21,670 |     
|                                                        
|                                                        
|                                                        
|                                                        
|Adjustment amount for purchased goodwill amortization    |         |      | 977           |      |               |   | 2,930  |     
|                                                        
|                                                        
|                                                        
|                                                        
|Adjustment amount for ACI equity investment amortization |         |      | 216           |      |               |   | 643    |     
|                                                         |         |      |               |      |               |   |        |     
|Adjusted net income                                      |         | $    | 14,942        |      |               | $ | 25,243 |     
|                                                         |         |      |               |      |               |   |        |     
|Reported net income per share:                           |         |      |               |      |               |   |        |     
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Basic   |      | $             | 0.30 |               |   | $      | 0.47 | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Diluted |      | $             | 0.29 |               |   | $      | 0.46 | 
|                                                        
|                                                        
|                                                        
|                                                        
|Adjusted net income per share:                           |         |      |               |      |               |   |        |     
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Basic   |      | $             | 0.32 |               |   | $      | 0.55 | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Diluted |      | $             | 0.31 |               |   | $      | 0.53 | 

Other intangible assets, both acquired and developed, subject to amortization
were as follows:

|                   |  |              |  |          |        |                    |         |                   |         |         |         |              |        |             |        |   |        |   |         |   |         |   |         |   |        |   |        | 
|------------------ |  | ------------ |  | -------- | ------ | ------------------ | ------- | ----------------- | ------- | ------- | ------- | ------------ | ------ | ----------- | ------ | - | ------ | - | ------- | - | ------- | - | ------- | - | ------ | - | ------ | 
|                   |  |              |  |          |        | September 30, 2002 |         | December 31, 2001
|                   |  |              |  |          |        |                    |         |                  
|                   |  | Amortization |  | Gross    |        |                    |         |                   |         |         |         |              |        | Gross       |        |   |        |   |         |   |         |  
|                   |  | Period       |  | Carrying |        | Accumulated        |         |                   |         |         |         | Carrying     |        | Accumulated |        |   |        |  
|(in thousands)     |  | In Years     |  | Amounts  |        | Amortization       |         | Net               |         | Amounts |         | Amortization |        | Net        
|                   |  |              |  |          |        |                    |         |                   |         |         |         |              |        |            
|Software           |  | 3 to 5       |  | $        | 67,236 |                    |         | $                 | (36,177 | )       |         | $            | 31,059 |             |        | $ | 65,079 |   |         | $ | (29,427 | ) |         | $ | 35,652 |  
|                  
|                  
|                  
|                  
|Customer contracts |  | 15 to 25     |  |          | 21,104 |                    |         |                   | (950    | )       |         |              | 20,154 |             |        |   | 11,693 |   |         |   | (195    | ) |         |   | 11,498 |  
|                  
|                  
|                  
|                  
|Other              |  | 3 to 5       |  |          | 73,290 |                    |         |                   | (60,929 | )       |         |              | 12,361 |             |        |   | 71,768 |   |         |   | (58,486 | ) |         |   | 13,282 |  
|                   |  |              |  |          |        |                    |         |                   |         |         |         |              |        |             |        |   |        |   |         |   |         |   |         |   |        |   |        | 
|                   |  |              |  |          |        | $                  | 161,630 |                   |         | $       | (98,056 | )            |        | $           | 63,574 |   |        | $ | 148,540 |   |         | $ | (88,108 | ) |        | $ | 60,432 | 
|                   |  |              |  |          |        |                    |         |                   |         |         |         |              |        |             |        |   |        |   |         |   |         |   |         |   |        |   |        | 

For the nine month periods ended September 30, 2002 and 2001, amortization
expense for intangible assets was $14.4 million and $16.4 million,
respectively. The estimated future annual amortization expense for intangible
assets held at September 30, 2002 is $17 million, $13 million, $8 million, $4
million and $2 million for the years 2003, 2004, 2005, 2006 and 2007,
respectively.

Note 6  Assets Held for Sale:

Due to the Companys restructuring and cost containment activities during the
third quarter of 2002, office buildings in Glendale, Wisconsin and Runcorn,
United Kingdom, were reclassified as Assets Held for Sale in the September
30, 2002 Consolidated Balance Sheet. The Company expects to sell these
buildings within the next year. The provisions of SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, require that assets held for sale
be valued at

7



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##### Table of Contents



the lower of carrying amount or fair value less cost to sell. Management
considered recent appraisals and offers relative to these assets in performing
this analysis, which resulted in the recording of a pre-tax loss of $3.0
million during the quarter ended September 30, 2002. This loss is reflected in
its entirety in the Companys segment reporting as unallocated corporate
overhead. This amount is reflected in Restructuring and asset
impairment charges in the
accompanying condensed consolidated statements of operations (see Note 7). In accordance
with SFAS No. 144, the assets included in Assets Held for Sale will no
longer be depreciated.

Note 7  Accrued Losses, Charges and Allowances:

Accrued Contract Losses

The Company has historically incurred losses related to its government services
business and has established a reserve to provide for expected losses on
existing long-term service contracts. Reversals of provision for contract losses are recorded in the Reversal of provision for contract losses line item of the accompanying condensed consolidated
statements of operations. During the third quarter of 2002, the Company recorded
a $2.0 million reversal of the provision to reflect a reduction in the expected
future losses related to its government EBT contracts. The following table
summarizes the activity of the accrued contract loss reserve:

|                                              |  |      |        |      |  |   |        |  
|--------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|(in thousands)                                |  | 2002 |        | 2001
|                                              |  |      |        |     
|Balance, beginning of year                    |  | $    | 14,777 |      |  | $ | 22,247 |  
|                                             
|                                             
|                                             
|                                             
|Charges to loss reserve                       |  |      | (1,208 | )    |  |   | (785   | )
|                                              |  |      |        |      |  |   |        |  
|Balance at March 31                           |  |      | 13,569 |      |  |   | 21,462 |  
|                                             
|                                             
|                                             
|                                             
|Charges to loss reserve                       |  |      | (938   | )    |  |   | (634   | )
|                                             
|                                             
|                                             
|                                             
|Cash payments                                 |  |      | (1,000 | )    |  |   | (1,000 | )
|                                              |  |      |        |      |  |   |        |  
|Balance at June 30                            |  |      | 11,631 |      |  |   | 19,828 |  
|                                             
|                                             
|                                             
|                                             
|Net reversal of provision for contract losses |  |      | (2,000 | )    |  |   | (2,500 | )
|                                             
|                                             
|                                             
|                                             
|Charges to loss reserve                       |  |      | (1,161 | )    |  |   | (1,782 | )
|                                              |  |      |        |      |  |   |        |  
|Balance at September 30                       |  | $    | 8,470  |      |  | $ | 15,546 |  
|                                              |  |      |        |      |  |   |        |  

Deluxe has agreed to indemnify the Company for certain future losses arising
from any litigation based on the conduct of the government services business
prior to the IPO, as well as any incremental future losses on contracts of the
government services segment which were in a loss position at April 30, 2000 to
the extent such losses exceed the estimates underlying the Companys loss
reserve balance at April 30, 2000. The Company plans to record any amounts
received from Deluxe under the indemnification agreement as a reduction of
expense when, and if, any additional contract or litigation losses are
recognized. Deluxes total indemnification obligations to the Company are
limited to $14.6 million. No such indemnification obligations have arisen
through September 30, 2002.

Restructuring and Asset Impairment Charges

Commencing in the second quarter of 2002, the Company initiated cost reduction
measures and began a comprehensive review of its existing business lines.
Charges related to these actions were accrued in the periods in which
management committed to execute such actions. During the second quarter of
2002, the Company recorded restructuring charges and asset impairment
charges of $10.4 million. These charges were comprised of expected severance benefits totaling
$3.4 million, $5.7 million of lease related costs associated with the
consolidation of facilities, and a net charge of $1.3 million related to
software impairment and other charges. Severance charges resulted from the
planned elimination of approximately 270 positions across all business
segments. The positions eliminated were primarily located in the United States.

During the third quarter of 2002, following the completion of its initial
review of its business lines and a decision to relocate certain administrative
functions to Scottsdale, Arizona, the Company recorded restructuring
and asset impairment charges of $6.1 million. These charges were comprised of expected severance
benefits of $1.1 million, impairment of fixed assets and lease related costs of
$1.2 million, impairment of capitalized software costs of $0.8 million and the
write-down of assets held for sale of $3.0 million related to a building in
Glendale, Wisconsin.

During the first quarter of 2001, restructuring accruals of $3.2 million were
recorded as a result of the planned closure of the Companys operations in
Bothell, Washington. These expenses related entirely to the Decision Support
and Risk Management segment.

The following table summarizes changes in the Companys restructuring accruals
for the three and nine month periods ended September 30, 2002:

8



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##### Table of Contents



|                                 |  |                    |      |                   |  |                     |        |   |  |   |       |    
|-------------------------------- |  | ------------------ | ---- | ----------------- |  | ------------------- | ------ | - |  | - | ----- | ---
|(in thousands, except employees) |  | Employees Affected |      | Severance-Related |  | Lease Related Costs
|                                 |  |                    |      |                   |  |                    
|Balance, December 31, 2001       |  |                    | 74   |                   |  | $                   | 1,011  |   |  | $ | 1,397 |    
|                                
|                                
|                                
|                                
|Expense provision                |  |                    |     |                   |  |                     |       |   |  |   |      |    
|                                
|                                
|                                
|                                
|Cash payments                    |  |                    | (31  | )                 |  |                     | (452   | ) |  |   |      |    
|                                 |  |                    |      |                   |  |                     |        |   |  |   |       |    
|Balance, March 31, 2002          |  |                    | 43   |                   |  |                     | 559    |   |  |   | 1,397 |    
|                                
|                                
|                                
|                                
|Expense provision                |  |                    | 271  |                   |  |                     | 3,397  |   |  |   | 4,623 | (1)
|                                
|                                
|                                
|                                
|Cash payments                    |  |                    | (38  | )                 |  |                     | (368   | ) |  |   | (879  | )  
|                                 |  |                    |      |                   |  |                     |        |   |  |   |       |    
|Balance, June 30, 2002           |  |                    | 276  |                   |  |                     | 3,588  |   |  |   | 5,141 |    
|                                
|                                
|                                
|                                
|Expense provision                |  |                    | 72   |                   |  |                     | 1,120  |   |  |   | 196   | (2)
|                                
|                                
|                                
|                                
|Cash payments                    |  |                    | (151 | )                 |  |                     | (1,955 | ) |  |   | (318  | )  
|                                 |  |                    |      |                   |  |                     |        |   |  |   |       |    
|Balance, September 30, 2002      |  |                    | 197  |                   |  | $                   | 2,753  |   |  | $ | 5,019 |    
|                                 |  |                    |      |                   |  |                     |        |   |  |   |       |    



---

|(1) |  | Does not include approximately $2.4 million of non-cash asset
impairment charges expensed in this period.
|--- |  | ---------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Does not include approximately $4.8 million of non-cash asset
impairment charges expensed in this period.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts for estimated losses that will
likely result from customers failing to pay the Company. The estimate of
the allowance is based on experience with specific customers,
understanding of their current economic circumstances and management's judgment as
to the likelihood of their ultimate payment. Management also considers collection
experience with the balance of the receivables portfolio and makes estimates
regarding collectibility based on trends in aging. Following the establishment
of the Company's collections and credit committee and the implementation of enhanced
collection processes and systems, the estimates utilized to calculate
the allowance for doubtful accounts were revised during the second quarter of 2002
to be more reflective of the Company's recent collection history. As a result of this
change in estimate, management reduced the allowance for uncollectible accounts by $2.5 million
during the second quarter of 2002. This reduction in allowance is reported in
the Other operating cost line item of the accompanying
condensed consolidated statements of operations. The allowance for
doubtful accounts balance was $2.4 million and
$4.8 million at September 30, 2002 and December 31, 2001, respectively.

Note 8  Long-term Debt and Credit Facilities:

Long-term debt consists principally of capital lease obligations related to
equipment. Long-term debt was as follows:

|                                |       |      |               |       |              |   |        |       | 
|------------------------------- | ----- | ---- | ------------- | ----- | ------------ | - | ------ | ----- | 
|                                |       |      | September 30, |       | December 31,
|(in thousands)                  |       | 2002 |               | 2001 
|                                |       |      |               |      
|Capital leases and other debt   |       |      | 3,296         |       |              | $ | 5,310  |      
|                               
|                               
|                               
|                               
|Less amount due within one year |       |      | (1,866        | )     |              |   | (2,781 | )    
|                                |       |      |               |       |              |   |        |      
|                                | Total |      | $             | 1,430 |              |   | $      | 2,529 | 
|                                |       |      |               |       |              |   |        |      

The capital lease obligations bear interest at rates ranging from 6.1% to 28.5%
and are due through the year 2005.

In September 2001, the Company obtained a revolving credit facility in the
amount of $20.0 million to replace a facility that was due to expire. The
Company did not borrow any funds under this facility and it was terminated by
agreement with the lending bank in August 2002.

Note 9  Net Income Per Share:

Net income per share  basic is computed by dividing net income by the weighted
average number of shares outstanding. Net income per share  diluted is
computed by dividing net income by the weighted average number of shares
outstanding and, if dilutive, the weighted average number of potentially
dilutive common shares outstanding. Potentially dilutive common shares are
shares issuable upon the exercise of outstanding in the money stock option
agreements. The Company uses the treasury stock method to calculate diluted
weighted average shares outstanding. This method assumes that the Company uses
the proceeds received from the hypothetical exercise of dilutive stock options
to repurchase shares at the average market price per share during the period.

9



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##### Table of Contents



The following table reflects the calculation of basic and diluted net income
per share:

|                                         |                                                         |      |                    |        |                   |      |   |        |  |  |   |        |  |  |   |        | 
|---------------------------------------- | ------------------------------------------------------- | ---- | ------------------ | ------ | ----------------- | ---- | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                         |                                                         |      | Three Months Ended |        | Nine Months Ended
|                                         |                                                         |      | September 30,      |        | September 30,    
|                                         |                                                         |      |                    |        |                  
|(in thousands, except per share amounts) |                                                         | 2002 |                    | 2001   |                   | 2002 |   | 2001  
|                                         |                                                         |      |                    |        |                   |      |   |       
|Net income per share  basic:            |                                                         |      |                    |        |                   |      |   |        |  |  |   |        |  |  |   |       
|                                        
|                                        
|                                        
|                                        
|                                         | Net income                                              |      | $                  | 10,671 |                   |      | $ | 13,749 |  |  | $ | 23,673 |  |  | $ | 21,670 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Weighted average shares outstanding                     |      |                    | 46,630 |                   |      |   | 46,248 |  |  |   | 46,561 |  |  |   | 45,850 | 
|                                         |                                                         |      |                    |        |                   |      |   |        |  |  |   |        |  |  |   |       
|                                         | Net income per share  basic                            |      | $                  | 0.23   |                   |      | $ | 0.30   |  |  | $ | 0.51   |  |  | $ | 0.47   | 
|                                         |                                                         |      |                    |        |                   |      |   |        |  |  |   |        |  |  |   |       
|Net income per share  diluted:          |                                                         |      |                    |        |                   |      |   |        |  |  |   |        |  |  |   |       
|                                        
|                                        
|                                        
|                                        
|                                         | Net income                                              |      | $                  | 10,671 |                   |      | $ | 13,749 |  |  | $ | 23,673 |  |  | $ | 21,670 | 
|                                         |                                                         |      |                    |        |                   |      |   |        |  |  |   |        |  |  |   |       
|                                         | Weighted average shares outstanding                     |      |                    | 46,630 |                   |      |   | 46,248 |  |  |   | 46,561 |  |  |   | 45,850 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Dilutive impact of stock options                        |      |                    | 14     |                   |      |   | 1,782  |  |  |   | 300    |  |  |   | 1,675  | 
|                                         |                                                         |      |                    |        |                   |      |   |        |  |  |   |        |  |  |   |       
|                                         | Weighted average shares and dilutive shares outstanding |      |                    | 46,644 |                   |      |   | 48,030 |  |  |   | 46,861 |  |  |   | 47,525 | 
|                                         |                                                         |      |                    |        |                   |      |   |        |  |  |   |        |  |  |   |       
|                                         | Net income per share  diluted                          |      | $                  | 0.23   |                   |      | $ | 0.29   |  |  | $ | 0.51   |  |  | $ | 0.46   | 
|                                         |                                                         |      |                    |        |                   |      |   |        |  |  |   |        |  |  |   |       

Note 10  Comprehensive Income:

The Companys total comprehensive income for the three month periods ended
September 30, 2002 and 2001 was $11.0 million and $13.7 million, respectively,
and $23.8 million and $21.2 million for the nine month periods ended September 30, 2002
and 2001, respectively. The Companys total comprehensive income consists of
net income and foreign currency translation adjustments.

Note 11  Business Segments:

As a result of restructuring, integration initiatives and its ATM acquisition
strategy, the Company reorganized its segments to consolidate its government
services business with its Electronic Payments segment. In addition, new
segments consisting of ATM Management Services, Decision Support and Risk
Management, and Professional Services have been separately identified. The
Company reports segment information consistent with the way management
internally disaggregates its operations to assess performance and to allocate
resources. The Electronic Payments segment includes ACH, POS, EFT and other
processing services across multiple financial networks, and EBT services for
government agencies. The ATM Management Services segment provides ATM
deployment, management and branding services. The Decision Support and Risk
Management segment provides risk management based data and other products to
financial institutions, retailers and other businesses to assist them in
detecting fraud and assessing the risk of opening a new account or accepting a
check. The Professional Services segment provides EFT software sales, software
applications development, maintenance and installation and business process
outsourcing services. The segment information presented below for the three and
nine month periods ended September 30, 2001 has been restated for comparative
purposes to reflect the Companys current segments.
The accounting policies of the segments are the same as those applied to the
Company on a consolidated basis. For internal reporting purposes, the Company
groups costs based upon managerial control. The majority of these managed cost
groups are directly assigned to a reportable segment. For cost groups
supporting more than one reportable segment, assignment of costs is dependent
upon activity-based drivers most appropriate for the cost group such as work
volumes, which include transactions, calls, customers, or other applicable
drivers such as square footage, revenue dollars and headcount. During the third
quarter of 2002, management applied similar methodologies for the assignment of
certain costs previously included in unallocated corporate expense. These
costs, which have also been reclassified in prior periods for comparative
purposes, include expenses directly attributable to product lines such as
business development, marketing, sales and promotion. The Company does not
allocate expenses that benefit all segments and are corporate or administrative
in nature. These costs include, but are not limited to, legal, accounting,
human resources, liability insurance and executive expenses.

10



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##### Table of Contents



Information concerning operations in these reportable segments of business is
as follows:

|                                                                                  |                                      |                                                                            |   |                    |         |                   |   |         |         |   |   |         |         |  |   |         |         | 
|--------------------------------------------------------------------------------- | ------------------------------------ | -------------------------------------------------------------------------- | - | ------------------ | ------- | ----------------- | - | ------- | ------- | - | - | ------- | ------- |  | - | ------- | ------- | 
|                                                                                  |                                      |                                                                            |   | Three Months Ended |         | Nine Months Ended
|                                                                                  |                                      |                                                                            |   | September 30,      |         | September 30,    
|                                                                                  |                                      |                                                                            |   |                    |         |                  
|(in thousands)                                                                    |                                      | 2002                                                                       |   | 2001               |         | 2002              |   | 2001   
|                                                                                  |                                      |                                                                            |   |                    |         |                   |   |        
|Net Revenue:                                                                      |                                      |                                                                            |   |                    |         |                   |   |         |         |   |   |         |         |  |   |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Electronic payments                  |                                                                            | $ | 48,410             |         |                   | $ | 46,959  |         |   | $ | 142,179 |         |  | $ | 137,881 |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | ATM management services              |                                                                            |   | 34,940             |         |                   |   | 19,696  |         |   |   | 83,090  |         |  |   | 54,600  |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Decision support and risk management |                                                                            |   | 36,160             |         |                   |   | 33,942  |         |   |   | 108,313 |         |  |   | 106,438 |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Professional services                |                                                                            |   | 24,485             |         |                   |   | 40,678  |         |   |   | 77,881  |         |  |   | 100,115 |        
|                                                                                  |                                      |                                                                            |   |                    |         |                   |   |         |         |   |   |         |         |  |   |        
|                                                                                  |                                      | Total net revenue                                                          |   |                    | 143,995 |                   |   |         | 141,275 |   |   |         | 411,463 |  |   |         | 399,034 | 
|                                                                                  |                                      |                                                                            |   |                    |         |                   |   |         |         |   |   |         |         |  |   |        
|Operating Expenses before restructuring
and other charges (credits):              |                                      |                                                                            |   |                    |         |                   |   |         |         |   |   |         |         |  |   |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Electronic payments                  |                                                                            |   | 31,972             |         |                   |   | 36,068  |         |   |   | 97,435  |         |  |   | 104,307 |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | ATM management services              |                                                                            |   | 33,608             |         |                   |   | 17,975  |         |   |   | 80,204  |         |  |   | 53,310  |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Decision support and risk management |                                                                            |   | 26,834             |         |                   |   | 31,645  |         |   |   | 85,875  |         |  |   | 94,101  |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Professional services                |                                                                            |   | 19,066             |         |                   |   | 22,507  |         |   |   | 59,354  |         |  |   | 70,612  |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Corporate                            |                                                                            |   | 12,946             |         |                   |   | 13,771  |         |   |   | 40,609  |         |  |   | 42,466  |        
|                                                                                  |                                      |                                                                            |   |                    |         |                   |   |         |         |   |   |         |         |  |   |        
|                                                                                  |                                      | Total operating expenses before
restructuring and other charges (credits)  |   |                    | 124,426 |                   |   |         | 121,966 |   |   |         | 363,477 |  |   |         | 364,796 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Restructuring and other charges (credits)(1):                                     |                                      |                                                                            |   |                    |         |                   |   |         |         |   |   |         |         |  |   |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Electronic payments                  |                                                                            |   | (813               | )       |                   |   | (2,500  | )       |   |   | 1,233   |         |  |   | (2,500  | )      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | ATM management services              |                                                                            |   | 24                 |         |                   |   |        |         |   |   | 62      |         |  |   |        |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Decision support and risk management |                                                                            |   | 703                |         |                   |   |        |         |   |   | 5,535   |         |  |   | 3,200   |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Professional services                |                                                                            |   |                   |         |                   |   |        |         |   |   | 868     |         |  |   |        |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Corporate                            |                                                                            |   | 4,165              |         |                   |   |        |         |   |   | 6,827   |         |  |   |        |        
|                                                                                  |                                      |                                                                            |   |                    |         |                   |   |         |         |   |   |         |         |  |   |        
|                                                                                  |                                      | Total restructuring and other charges (credits)                            |   |                    | 4,079   |                   |   |         | (2,500  | ) |   |         | 14,525  |  |   |         | 700     | 
|                                                                                  |                                      |                                                                            |   |                    |         |                   |   |         |         |   |   |         |         |  |   |        
|Income (loss) from operations including
restructuring and other charges (credits) |                                      |                                                                            |   |                    |         |                   |   |         |         |   |   |         |         |  |   |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Electronic payments                  |                                                                            |   | 17,251             |         |                   |   | 13,391  |         |   |   | 43,511  |         |  |   | 36,074  |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | ATM management services              |                                                                            |   | 1,308              |         |                   |   | 1,721   |         |   |   | 2,824   |         |  |   | 1,290   |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Decision support and risk management |                                                                            |   | 8,623              |         |                   |   | 2,297   |         |   |   | 16,903  |         |  |   | 9,137   |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Professional services                |                                                                            |   | 5,419              |         |                   |   | 18,171  |         |   |   | 17,659  |         |  |   | 29,503  |        
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | Corporate                            |                                                                            |   | (17,111            | )       |                   |   | (13,771 | )       |   |   | (47,436 | )       |  |   | (42,466 | )      
|                                                                                  |                                      |                                                                            |   |                    |         |                   |   |         |         |   |   |         |         |  |   |        
|                                                                                  |                                      | Income from operations including
restructuring and other charges (credits) |   | $                  | 15,490  |                   |   | $       | 21,809  |   |   | $       | 33,461  |  |   | $       | 33,538  | 

(1) Includes asset impairment charges
and reversal of provision for contract losses.

The Company has not disclosed assets by segment as this information is not
reviewed by the chief operating decision maker, is not produced internally and
is not practicable to prepare.

Revenue is attributed to geographic areas based on the location of the assets
producing the revenue. The Companys net revenues and property and equipment by
geographic area are as follows:

|                        |                    |      |                    |         |                   |      |              |         |  |   |         |         |  |   |         |         | 
|----------------------- | ------------------ | ---- | ------------------ | ------- | ----------------- | ---- | ------------ | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                        |                    |      |                    |         |                   |      | Net Revenues |         |  |   |        
|                        |                    |      |                    |         |                   |      |              |         |  |   |        
|                        |                    |      | Three Months Ended |         | Nine Months Ended
|                        |                    |      | September 30,      |         | September 30,    
|                        |                    |      |                    |         |                  
|(in thousands)          |                    | 2002 |                    | 2001    |                   | 2002 |              | 2001   
|                        |                    |      |                    |         |                   |      |              |        
|United States           |                    | $    | 131,895            |         |                   | $    | 131,847      |         |  | $ | 375,704 |         |  | $ | 368,771 |        
|                       
|                       
|                       
|                       
|United Kingdom          |                    |      | 3,985              |         |                   |      | 3,346        |         |  |   | 11,465  |         |  |   | 12,846  |        
|                       
|                       
|                       
|                       
|India                   |                    |      | 5,599              |         |                   |      | 6,082        |         |  |   | 17,478  |         |  |   | 17,417  |        
|                       
|                       
|                       
|                       
|Other foreign countries |                    |      | 2,516              |         |                   |      |             |         |  |   | 6,816   |         |  |   |        |        
|                        |                    |      |                    |         |                   |      |              |         |  |   |         |         |  |   |         |        
|                        | Total consolidated |      | $                  | 143,995 |                   |      | $            | 141,275 |  |   | $       | 411,463 |  |   | $       | 399,034 | 
|                        |                    |      |                    |         |                   |      |              |         |  |   |         |         |  |   |         |        

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|                        |                    |      |                            |        |              |   |        |        | 
|----------------------- | ------------------ | ---- | -------------------------- | ------ | ------------ | - | ------ | ------ | 
|                        |                    |      | Property and Equipment-Net
|                        |                    |      |                           
|                        |                    |      | September 30,              |        | December 31,
|(in thousands)          |                    | 2002 |                            | 2001  
|                        |                    |      |                            |       
|United States           |                    | $    | 41,942                     |        |              | $ | 64,687 |       
|                       
|                       
|                       
|                       
|United Kingdom          |                    |      | 142                        |        |              |   | 1,736  |       
|                       
|                       
|                       
|                       
|India                   |                    |      | 9,045                      |        |              |   | 8,950  |       
|                       
|                       
|                       
|                       
|Other foreign countries |                    |      | 1,380                      |        |              |   | 265    |       
|                        |                    |      |                            |        |              |   |        |       
|                        | Total consolidated |      | $                          | 52,509 |              |   | $      | 75,638 | 
|                        |                    |      |                            |        |              |   |        |       

Note 12  Commitments and Contingencies:

In connection with the Companys government services, collection and ATM
placement activities, the Company posts surety bonds with state agencies
guaranteeing its performance of certain obligations related to the relevant
contracts or state requirements. The aggregate amount of such bonds outstanding
at September 30, 2002 was $4.3 million.

The Company had outstanding letters of credit amounting to $1.0 million at
September 30, 2002 which were collateralized with a $1.0 million cash deposit
at the issuing bank.

The Company has guaranteed certain equipment lease payments for Canadian
customers of its ATM management business totaling $1.9 million as of September
30, 2002. Through September 30, 2002, the Company has been required to make
payments of approximately $98,000 pursuant to these guarantees.

In December 2001, the Company entered into a subscription agreement to acquire
a 15% interest in Webtel Pty. Ltd., an Australian corporation (Webtel).
Pursuant to the subscription agreement, the Company invested $1.3 million in
Webtel in 2001 and has committed to invest an additional $0.8 million upon the
satisfaction of certain conditions specified in the subscription agreement.

The Company has approximately $1.5 million in time deposits, denominated in
Indian rupees, primarily for securing letters of credit issued in the ordinary
course of business by its India operations. The Company also has approximately
$1.4 million in time deposits, denominated in Indian rupees, related to the
guarantee of performance on a customer contract and certain obligations related
to local government requirements.

The Company operates a call center in Mumbai, India under a customer contract.
The customer receives credits toward a right to purchase, after December 31,
2002, a minority interest in, or sole ownership of, certain assets used by the
Company in performing call center operations for the customer as well as
transition assistance. The customers right to acquire an ownership right in
the assets is determined by a formula that is driven primarily by the revenue
generated by the contract. As of September 30, 2002, the customer was entitled
to acquire an approximate 5% ownership interest.

On March 8, 2002, the Company received a letter from the Securities and
Exchange Commission (the SEC) stating that the SEC is conducting an inquiry
of the Company and requesting the Companys voluntary assistance in connection
with the provision of certain documents relating to the Companys 2001
financial results and certain transactions between the Company and ACI, among
other things. The letter from the SEC states that the inquiry is non-public and
that it should not be construed as an indication that the SEC believes any
violation of law has occurred. In October and November 2002, the SEC requested additional
information related to various transactions that occurred in 2000 and 2001,
including data license and software sales. The Company is cooperating fully
with the SEC in resolving these matters. The Company may, however, be the
subject of additional inquiries or become subject to a fine or other
liabilities.

Note 13  Restatement:

Subsequent to the issuance of the Companys consolidated financial statements
for the year ended December 31, 2001, and in response to
questions raised in connection with an internal audit of certain
significant vendor contracts, the Company conducted an
investigation of certain significant transactions
reflected in the Companys financial statements during 2000 and
2001. As a result of this investigation, the Companys
management determined that the historical accounting treatment that
had been afforded to (i) certain data purchase agreements with Experian Information Systems
(Experian) and Acxiom Corporation (Acxiom), (ii) certain tax contingencies
related to the Companys India based operations, and (iii) the timing of
revenue recognition for certain software licenses sold by the Companys
subsidiary in the United Kingdom and, (iv) tax benefits associated with stock option
exercises in 2001, should be revised. The revisions are discussed below:

12



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| |  | Experian:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In June 2000, the Company and Experian executed a Data Purchase Agreement
(the 2000 Agreement), which expired June 30, 2001. The Company recognized
$3 million of revenue from a data file sale related to the 2000 Agreement in
the second quarter of 2000, and minimum royalties of $1.5 million and $0.5
million were recorded as revenue in the first and second quarters of 2001,
respectively. In June 2001, the Company and Experian executed a new Data
Purchase Agreement (the 2001 Agreement), which expires in March 2003. The
Company recognized $3 million of revenues from a data file sale related to
the 2001 agreement in the second quarter of 2001. In July 2001, the Company
also entered into a Data Access/Use Agreement with Experian. The Company
recorded revenue of $0.2 million in the third quarter of 2001 related to the
Data Access/Use Agreement.                                                                                                                                                                                                                                          
|
| |  | Management has subsequently determined that the 2001 Agreement and the Data
Access/Use Agreement should be viewed as interrelated and in substance one
agreement that became effective in July 2001. Management has also
determined that sufficient objective evidence of fair value does not exist
to support separate accounting for the various elements of the 2000 and 2001
Agreements. As a result, management determined that these transactions
should be treated as service arrangements for which revenue should be
recognized ratably over the service periods and that revenue recognition
should not commence until the last essential element of the arrangements was
delivered, which was October 2000 for the 2000 Agreement and August 2001 for
the 2001 Agreement. This treatment results in recognition of the $5 million
of total fees related to the 2000 Agreement ratably over the remaining term
of that agreement, commencing October 2000, and recognition of the $3.2
million of total fees related to the 2001 Agreement ratably over the
remaining term of that agreement, commencing August 2001.
|
| |  | Acxiom:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | During the period from March 2001 through June 2001, the Company and Acxiom
negotiated and executed agreements (Vendor Agreements) related to three
primary arrangements under which the Company purchased outsourcing and
data-related services from Acxiom that were being provided over terms
extending through March 2006. Also in June 2001, the Company and Acxiom
executed a Data Purchase Agreement under which the Company sold data files
to Acxiom. Under the terms of the Vendor Agreements, the Company was
recognizing the cost of the services as they were billed by Acxiom, and the
Company recognized $3 million in revenue from the data file sale under the
Data Purchase Agreement in the second quarter of 2001.                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Management has subsequently determined that the Vendor Agreements and the
Data Purchase Agreement should be viewed as economically interrelated and
treated as a single agreement between the parties, and that the $3 million
received from Acxiom under the Data Purchase Agreement should be treated as a reduction of expense associated with the Vendor Agreements
over the remaining term of those agreements rather than as an item of
revenue. Management also determined that the expenses related to the Vendor
Agreements and one other service contract, which contain fixed prices over
their terms, should be recorded on a ratable basis over the term of the
related service periods.                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Income Taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Management has determined that
the liabilities associated with certain tax contingencies related to the
Companys India based operations were underestimated, resulting in an
understatement of income tax expense for federal income tax purposes of
$0.8 million and $0.2 million in 2001 and 2000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | United Kingdom  Software Licenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Management also determined that $1.0 million in software licenses sold by
the Companys subsidiary in the United Kingdom during 2001 had been
incorrectly recognized as revenue prior to obtaining a signed license
agreement which resulted in an overstatement of revenues by $0.2 million and $0.8 million in the first and second quarters of 2001,
respectively, and an understatement of revenues of $0.9 million and $0.1 million, respectively,
in the third and fourth quarters of 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | In addition, one other
miscellaneous adjustment was made to recognize $0.3 million of revenue
ratably in the second and third quarters of 2000 that had previously been
recognized in the first quarter of 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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| |  | Exercise of stock options:                                                                                                                                                                                                                                                                                                                                                
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Management also determined that the Company had not accounted for $2.2
million in tax benefits associated with the exercise of certain stock
options in 2001, which should have been recognized as an increase in
additional paid-in capital and a reduction in income taxes payable. This
adjustment did not affect the Statement of Operations for any period
presented.

As a result, the accompanying condensed consolidated financial statements
include amounts as of
December 31, 2001 and for the three and nine month periods ended September 30,
2001 that have been restated from amounts previously reported to
revise the
accounting for these transactions, as summarized below:

|                                          |  |                         |         |             |  |   |         | 
|----------------------------------------- |  | ----------------------- | ------- | ----------- |  | - | ------- | 
|                                          |  | As of December 31, 2001
|                                          |  |                        
|                                          |  | As Previously           |         |             |  |  
|                                          |  | Reported                |         | As Restated
|                                          |  |                         |         |            
|(in thousands)                            |  |                         |         |             |  |   |         | 
|                                         
|                                         
|                                         
|                                         
|Accounts receivable net                   |  | $                       | 79,444  |             |  | $ | 78,488  | 
|                                         
|                                         
|                                         
|                                         
|Deferred income taxes                     |  |                         | 10,844  |             |  |   | 13,492  | 
|                                         
|                                         
|                                         
|                                         
|Prepaid expenses and other current assets |  |                         | 14,444  |             |  |   | 14,364  | 
|                                         
|                                         
|                                         
|                                         
|Total current assets                      |  |                         | 210,175 |             |  |   | 211,787 | 
|                                         
|                                         
|                                         
|                                         
|Total assets                              |  |                         | 441,304 |             |  |   | 442,916 | 
|                                         
|                                         
|                                         
|                                         
|Accrued liabilities                       |  |                         | 35,643  |             |  |   | 36,565  | 
|                                         
|                                         
|                                         
|                                         
|Deferred revenue                          |  |                         | 12,831  |             |  |   | 14,377  | 
|                                         
|                                         
|                                         
|                                         
|Total current liabilities                 |  |                         | 91,543  |             |  |   | 94,011  | 
|                                         
|                                         
|                                         
|                                         
|Other long-term liabilities               |  |                         | 2,713   |             |  |   | 4,748   | 
|                                         
|                                         
|                                         
|                                         
|Total liabilities                         |  |                         | 104,098 |             |  |   | 108,601 | 
|                                         
|                                         
|                                         
|                                         
|Additional paid-in capital                |  |                         | 404,993 |             |  |   | 407,210 | 
|                                         
|                                         
|                                         
|                                         
|Total stockholders equity                |  |                         | 337,206 |             |  |   | 334,315 | 

|                                      |                                              |  |                       |         |             |  |   |         | 
|------------------------------------- | -------------------------------------------- |  | --------------------- | ------- | ----------- |  | - | ------- | 
|                                      |                                              |  | For the Quarter Ended
|                                      |                                              |  | September 30, 2001   
|                                      |                                              |  |                      
|                                      |                                              |  | As Previously         |         |             |  |  
|                                      |                                              |  | Reported              |         | As Restated
|                                      |                                              |  |                       |         |            
|(in thousands, except per share data) |                                              |  |                       |         |             |  |   |        
|                                     
|                                     
|                                     
|                                     
|                                      | Net revenue                                  |  | $                     | 140,358 |             |  | $ | 141,275 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Processing, communication, and service costs |  |                       | 50,282  |             |  |   | 50,692  | 
|                                     
|                                     
|                                     
|                                     
|                                      | Total operating expenses                     |  |                       | 119,056 |             |  |   | 119,466 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Income from operations                       |  |                       | 21,302  |             |  |   | 21,809  | 
|                                     
|                                     
|                                     
|                                     
|                                      | Net income                                   |  |                       | 13,645  |             |  |   | 13,749  | 
|                                     
|                                     
|                                     
|                                     
|                                      | Net income per share  basic                 |  | $                     | 0.30    |             |  | $ | 0.30    | 
|                                     
|                                     
|                                     
|                                     
|                                      | Net income per share  diluted               |  | $                     | 0.28    |             |  | $ | 0.29    | 

|                                      |                                              |  |                           |         |             |  |   |         | 
|------------------------------------- | -------------------------------------------- |  | ------------------------- | ------- | ----------- |  | - | ------- | 
|                                      |                                              |  | For the Nine Months Ended
|                                      |                                              |  | September 30, 2001       
|                                      |                                              |  |                          
|                                      |                                              |  | As Previously             |         |             |  |  
|                                      |                                              |  | Reported                  |         | As Restated
|                                      |                                              |  |                           |         |            
|(in thousands, except per share data) |                                              |  |                           |         |             |  |   |        
|                                     
|                                     
|                                     
|                                     
|                                      | Net revenue                                  |  | $                         | 403,813 |             |  | $ | 399,034 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Processing, communication, and service costs |  |                           | 147,100 |             |  |   | 147,648 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Total operating expenses                     |  |                           | 364,948 |             |  |   | 365,496 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Income from operations                       |  |                           | 38,865  |             |  |   | 33,538  | 
|                                     
|                                     
|                                     
|                                     
|                                      | Net income                                   |  |                           | 25,466  |             |  |   | 21,670  | 
|                                     
|                                     
|                                     
|                                     
|                                      | Net income per share  basic                 |  | $                         | 0.56    |             |  | $ | 0.47    | 
|                                     
|                                     
|                                     
|                                     
|                                      | Net income per share  diluted               |  | $                         | 0.54    |             |  | $ | 0.46    | 

In October 2002, the staff of the
Securities and Exchange Commission requested additional information
from us related to, among other things, certain of the matters that
are the subject of this restatement.

14



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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:

As discussed in Note 13 to the condensed consolidated financial statements
included in Item 1, the condensed consolidated financial statements for the
three and nine month periods ended September 30, 2001 have been restated. The
following management discussion and analysis takes into account the effects of
the restatement.

The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the notes to those financial statements
included in this Amended Quarterly Report on Form 10-Q/A and our 2001 Amended
Annual Report on Form 10-K/A filed with the Securities & Exchange Commission.

Forward-Looking Statements

In addition to historical and pro forma information, this Amended Quarterly
Report contains forward-looking statements as defined in the U.S. Private
Securities Litigation Reform Act of 1995. All forward-looking statements are
subject to various risks and uncertainties that could cause actual results to
differ materially from those described in the statements. Some of the factors
that could cause actual results to differ from those that are presently
anticipated are discussed in Item 5 of this Amended Quarterly Report.

Overview

eFunds Corporation and its wholly-owned subsidiaries (the Company, we or
us) provide transaction processing, risk management and professional services
to financial institutions, retailers, electronic funds transfer networks,
e-commerce providers and government agencies. The Company has four operating
segments: Electronic Payments; Automated Teller Machine (ATM) Management
Services; Decision Support and Risk Management; and Professional Services. The
Electronic Payments segment provides automated clearinghouse (ACH), point of
sale (POS) electronic funds transfer (EFT), and other processing services
across multiple financial networks and electronic benefits transfer (EBT)
services for government agencies. The ATM Management Services segment provides
ATM deployment, management and branding services. The Decision Support and Risk
Management segment provides risk management based data and other products to
financial institutions, retailers and other businesses that assist in detecting
fraud and assessing the risk of opening a new account or accepting a check. The
Professional Services segment provides EFT software sales, software
applications development, maintenance and installation and business process
outsourcing services.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles that are generally
accepted in the United States of America. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates and judgments, including those related to revenue recognition,
intangible assets, accrued contract losses, bad debts, income taxes and
stock-based compensation. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances. The results of these estimates form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements:

Revenue recognition  Our net revenues consist of transaction processing and
service fees, decision support fees, software and data licensing, maintenance
and support fees, government service fees, and information technology
consulting and business process management services fees. Our revenue
recognition policies for these various fees are as follows:



| |  | Transaction processing and service fees are recognized in the period that
the service is performed. These services consist of processing our
customers electronic debit transactions through electronic funds transfer
networks and settling the funds with the financial institutions involved
in the transactions. Additionally, these services include monitoring ATMs
and point-of-sale devices to alert our customers when potential problems
occur. These fees are charged on a per transaction basis, depending on the
contractual arrangement with the customer. We also receive
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|  |  | fees paid by consumers utilizing ATM machines owned or managed by us and fees
paid by their banks for interchange services. Government services fees are
recognized in the period services are provided based on monthly fees per
benefits recipient.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | Decision support fees are recognized as revenue in the period the services
are provided. Decision support services consist of new account applicant and
check verification screenings to manage the risk associated with account
openings and check acceptance. Decision support fees are based on the number
of inquiries against the databases used for screening purposes or monthly
fees based on the aggregate dollar value of checks authorized by the retailer
or other similar measures, depending on the product and service.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| 
|  |  | Software and data license fees for standard products are recognized when a
license agreement has been signed, the license fee is fixed and determinable,
collectibility of the license fee is probable, delivery has occurred and
there are no uncertainties surrounding product acceptance. If a license
contains customer acceptance criteria for which significant uncertainties
exist, the revenue is recognized upon the earlier of customer acceptance or
the expiration of the acceptance period. Certain software products include
multiple modules and the license fee charged to the customer is based on the
modules licensed. If a customer contract requires that we deliver multiple
elements, then upfront fees are recognized as revenue if vendor specific
objective evidence of fair value exists for each of the undelivered elements.
If vendor specific objective evidence of fair value does not exist, then the
total fees of the arrangement are recognized over the term of the related
agreement based upon delivery of all essential elements.
| 
| |  | We also provide professional services consisting of information
technology consulting and business process management services.
Revenue from providing such services is generally recognized under one
of two methods, depending on the relevant contractual terms. Under the
time and materials method, which is applied to nearly all of our
Professional Services contracts, revenue is based on a fee per hour
basis and is recognized as hours are completed. Under the fixed
contract method, a pre-set fee is agreed upon for a project, and
revenue is recognized proportionately to the percentage of completion
of the project. If the information technology consulting services
involve the significant customization of software that has been
licensed from us, the license fee is also recognized proportionately
to the percentage of completion of the project.                                                                                                                                                                                         
| 
| |  | Software maintenance and support revenue is recognized ratably over
the term of the contract or as the services are provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

The process involved in evaluating the appropriateness of revenue recognition
involves judgments about vendor-specific objective evidence of the fair value
of each of the various elements to be delivered in a sale that has multiple
components, collectibility of fees, and projections of costs to complete
projects for our customers.

Intangible Assets  Our intangible assets consist primarily of goodwill,
capitalized software costs and acquired customer contracts. We capitalize the
cost of software developed or obtained for internal use once the preliminary
project stage has been completed, management commits to funding the project and
it is probable that the project will be completed and that the software will be
used to perform the function intended. Capitalized costs include only (1)
external direct costs of materials and services consumed in developing or
obtaining internal-use software, (2) payroll and payroll-related costs for
employees who are directly associated with and who devote time to the
internal-use software project, and (3) interest costs incurred, when material,
while developing internal-use software. Capitalization of costs ceases when the
project is substantially complete and the software is ready for its intended
use. Software developed or obtained for internal use is tested for impairment
whenever events or changes in circumstances indicate that its carrying amount
may not be recoverable.

We capitalize the cost of software developed for licensing and resale once
technological feasibility has been established. Costs incurred prior to
establishing technological feasibility are expensed as incurred. Technological
feasibility is established when we have completed all planning, designing,
coding and testing activities that are necessary to determine that a product
can be produced to meet its design specifications, including functions,
features and technical performance requirements. Capitalization of costs ceases
when the product is available for general release to customers. Such costs are
amortized on a product-by-product basis over no longer than five years.
Software developed for resale is carried at the lesser of amortized cost or net
realizable value.

When we acquire other companies, generally accepted accounting principles
require that we make estimates regarding

16



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the fair values of the acquirees tangible assets and liabilities and
identifiable intangible assets. Based upon these estimates, we then allocate
the purchase price to the assets and liabilities of the acquired company for
the purpose of recording these items in our financial records. Any unallocated
purchase price is considered to be, and recorded as, goodwill. The distinction
between the amount of the purchase price allocated either to tangible assets
and liabilities or identifiable intangible assets and goodwill is significant
as goodwill is not amortized to the statement of operations but is instead
subject to an annual impairment test. Estimates inherent in the process of this
purchase price allocation include assumptions regarding the timing and amounts
of future cash inflows and outflows, the saleability of inventories, selection
of discount rates, contract renewal rates and general market conditions. Where
appropriate, we use third-party valuation professionals to assist us in making
these estimates.

The process of evaluating goodwill and other intangible assets, including
capitalized software costs and acquired customer contracts, for impairment
involves judgments about market conditions and economic indicators, estimates
of future cash flows and assumptions about our strategic plans with regard to
our operations. To the extent additional information arises or our strategies
change, it is possible that our conclusions regarding the carrying value of our
intangible assets could change and materially affect our financial position or
results of operations. We recorded a write-down of capitalized software
associated with under-performing products in the second and third quarters of
2002 of $0.8 million each.

Reserves and Allowances  We maintain a reserve for expected future losses on
certain EBT contracts. Our estimates of such losses are based on a variety of
assumptions including assumptions about future welfare case levels, number of
transactions per case and costs related to processing transactions and support
services. These assumptions are subject to significant uncertainties and may
differ substantially from actual results. In the event such differences arise,
a revision to the loss contract reserve would be required. Any such revision
could have a material effect on our financial position or results of
operations.

We maintain an allowance for doubtful accounts for estimated losses resulting
from our customers failing to make required payments. We develop our estimate
of the allowance based on our experience with specific customers, our
understanding of their current economic circumstances and our own judgment as
to the likelihood of their ultimate payment. We also consider our collection
experience with the balance of our receivables portfolio and make estimates
regarding collectibility based on trends in aging. The estimates utilized to
calculate our allowance for doubtful accounts were revised during the second
quarter of 2002 following the establishment of our collections and credit
committee and the implementation of enhanced collection processes and systems
to be more reflective of our recent collection history. As a result of this
change in estimate, we reduced our estimated uncollectible accounts by $2.5 million
during the second quarter of 2002. If the financial condition of our customers
were to deteriorate, thereby impairing their ability to make payments, an
increase in this allowance could be required in a future period.

Income Taxes  Accounting for income taxes requires significant judgments in
the development of estimates used in income tax calculations. Such judgments
would include, but would not be limited to, the likelihood the Company would
realize the benefits of net operating loss carry forwards, the adequacy of
valuation allowances, the rates used to measure transactions with foreign
subsidiaries and the development of valuation models used for measuring the
value of certain transactions. Further, our operations are governed by and
subject to government regulations in the United States and in foreign countries
in which we operate, including laws and regulations relating to taxation and
the judgments and estimates used are subject to challenge by domestic and
foreign taxing authorities. The Company recognizes tax liabilities at such time
as they are judged to be probable of being incurred and they can be reasonably
estimated. It is possible that either foreign or domestic taxing
authorities could challenge those judgments and estimates and draw
conclusions that would cause the Company to incur tax liabilities in
excess of those currently recorded.

We record a valuation allowance to reduce our deferred tax assets to the amount
that is more likely than not to be realized. Although we have considered future
taxable income and ongoing prudent and feasible tax planning strategies in
assessing the need for the valuation allowance, in the event we were to
determine that we will be able to realize our deferred tax assets in the future
in excess of the net recorded amount, an adjustment to the deferred tax asset
would increase income in the period any such determination was made. Likewise,
should we determine that we would not be able to realize all or part of our net
deferred tax asset in the future, an adjustment to the deferred tax asset would
be charged to income in the period any such determination was made.

We consider the undistributed earnings of our foreign subsidiaries to be
permanently invested and, accordingly, we have not provided for U.S. Federal,
state income or applicable foreign withholding taxes on those amounts. Upon any
distribution of those earnings in the form of dividends or otherwise, we would
be subject to both U.S. income taxes

17



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##### Table of Contents



(subject to an adjustment for foreign tax credits) and applicable withholding
taxes payable to the foreign countries. Determination of the amount of
unrecognized deferred U.S. income tax liability is not practicable because of
the complexities associated with such a hypothetical calculation.

Results of Operations  Three and Nine Months ended September 30, 2002 Compared to Three and Nine Months Ended September 30, 2001

The following table presents, for the periods indicated, the relative
composition of net revenues and selected statements of operations data as a
percentage of net revenues:

|                           |                                             |                    |                          |      |                    |      |                   |      |       |      |      |      |       |      |      |      |       |      | 
|-------------------------- | ------------------------------------------- | ------------------ | ------------------------ | ---- | ------------------ | ---- | ----------------- | ---- | ----- | ---- | ---- | ---- | ----- | ---- | ---- | ---- | ----- | ---- | 
|                           |                                             |                    |                          |      | Three Months Ended |      | Nine Months Ended
|                           |                                             |                    |                          |      | September 30,      |      | September 30,    
|                           |                                             |                    |                          |      |                    |      |                  
|                           |                                             |                    |                          |      | 2002               |      | 2001              |      | 2002  |      | 2001
|                           |                                             |                    |                          |      |                    |      |                   |      |       |      |     
|Net revenue                |                                             |                    |                          |      |                    |      |                   |      |       |      |      |      |       |      |      |     
|                          
|                          
|                          
|                          
|                           | Electronic Payments                         |                    |                          | 33.6 | %                  |      |                   | 33.2 | %     |      |      | 34.6 | %     |      |      | 34.5 | %    
|                          
|                          
|                          
|                          
|                           | ATM Management Services                     |                    |                          | 24.3 |                    |      |                   | 13.9 |       |      |      | 20.2 |       |      |      | 13.7 |      
|                          
|                          
|                          
|                          
|                           | Decision Support and Risk Management        |                    |                          | 25.1 |                    |      |                   | 24.1 |       |      |      | 26.3 |       |      |      | 26.7 |      
|                          
|                          
|                          
|                          
|                           | Professional Services                       |                    |                          | 17.0 |                    |      |                   | 28.8 |       |      |      | 18.9 |       |      |      | 25.1 |      
|                           |                                             |                    |                          |      |                    |      |                   |      |       |      |      |      |       |      |      |     
|                           |                                             | Total net revenues |                          |      | 100.0              |      |                   |      | 100.0 |      |      |      | 100.0 |      |      |      | 100.0 |     
|                           |                                             |                    |                          |      |                    |      |                   |      |       |      |      |      |       |      |      |     
|Operating expenses         |                                             |                    |                          |      |                    |      |                   |      |       |      |      |      |       |      |      |     
|                          
|                          
|                          
|                          
|                           | Processing, communication and service costs |                    |                          | 43.8 |                    |      |                   | 35.9 |       |      |      | 40.6 |       |      |      | 37.0 |      
|                          
|                          
|                          
|                          
|                           | Employee costs                              |                    |                          | 29.6 |                    |      |                   | 36.5 |       |      |      | 33.9 |       |      |      | 39.4 |      
|                          
|                          
|                          
|                          
|                           | Depreciation and amortization               |                    |                          | 6.3  |                    |      |                   | 7.3  |       |      |      | 6.9  |       |      |      | 7.6  |      
|                          
|                          
|                          
|                          
|                           | Other operating expenses                    |                    |                          | 6.7  |                    |      |                   | 6.7  |       |      |      | 7.0  |       |      |      | 7.4  |      
|                          
|                          
|                          
|                          
|                           | Restructuring and asset impairment charges  |                    |                          | 4.2  |                    |      |                   |     |       |      |      | 4.0  |       |      |      | 0.8  |      
|                          
|                          
|                          
|                          
|                           | Loss contract credits                       |                    |                          | (1.4 | )                  |      |                   | (1.8 | )     |      |      | (0.5 | )     |      |      | (0.6 | )    
|                           |                                             |                    |                          |      |                    |      |                   |      |       |      |      |      |       |      |      |     
|                           |                                             |                    | Total operating expenses |      |                    | 89.2 |                   |      |       | 84.6 |      |      |       | 91.9 |      |      |       | 91.6 | 
|                           |                                             |                    |                          |      |                    |      |                   |      |       |      |      |      |       |      |      |     
|Income from operations     |                                             |                    | 10.8                     |      |                    |      | 15.4              |      |       |      | 8.1  |      |       |      | 8.4  |     
|                          
|                          
|                          
|                          
|Other income-net           |                                             |                    | (0.2                     | )    |                    |      | (0.2              | )    |       |      | 0.1  |      |       |      | 0.1  |     
|                           |                                             |                    |                          |      |                    |      |                   |      |       |      |      |      |       |      |      |     
|Income before income taxes |                                             |                    | 10.6                     |      |                    |      | 15.2              |      |       |      | 8.2  |      |       |      | 8.5  |     
|                          
|                          
|                          
|                          
|Provision for income taxes |                                             |                    | (3.2                     | )    |                    |      | (5.5              | )    |       |      | (2.4 | )    |       |      | (3.1 | )   
|                           |                                             |                    |                          |      |                    |      |                   |      |       |      |      |      |       |      |      |     
|Net income                 |                                             |                    | 7.4                      | %    |                    |      | 9.7               | %    |       |      | 5.8  | %    |       |      | 5.4  | %   
|                           |                                             |                    |                          |      |                    |      |                   |      |       |      |      |      |       |      |      |     

Net revenue- Net revenue increased $2.7 million, or 1.9%, to $144.0 million
for the third quarter of 2002 from $141.3 million for the third quarter of
2001. Net revenue increased $12.5 million, or 3.1%, to $411.5 million for the
first nine months of 2002 from $399.0 million for the first nine months of
2001.

Electronic Paymentsnet revenue increased $1.4 million, or 3.0%, to $48.4
million in the third quarter of 2002 from $47.0 million in the third quarter of
2001. Net revenue increased $4.3 million, or 3.1% to $142.2 million for the
first nine months of 2002 from $137.9 million for the first nine months of
2001. Revenue growth in this segment for the quarter and nine month period was
driven by higher EBT case counts and the renewal of certain government
contracts at improved rates.

Although we continue to pursue EBT contracts where we can obtain them on a
profitable basis, we expect to see a decline in the revenues of the government
services business as existing contracts expire. Our electronic Medicaid
eligibility verification system (EMEVS) contract with the state of New York has
been extended through December 2002. The approximate annual revenue from this
contract is $11.6 million. New York has the option to further extend this
contract, although we do not currently expect New York will exercise any of its
additional extension options. An additional EBT contract, which generated $3.9
million in revenue in 2001, is scheduled to expire at the end of 2002, although
all of our government services contracts are terminable by the contracting
governmental entity at any time.

Excluding the impact of EITF 01-14 (see Accounting Change in notes to financial
statements), revenues from ACH, POS, EFT and other processing activities
decreased slightly due to the previously expected revenue declines associated
with the STAR network. Processing revenues from this network were approximately
$7 million during the quarter ended September 30, 2001 and $21 million during
the first nine months of 2001 as compared to the processing revenues of

18



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approximately $5 million and $17 million we derived from this relationship in
the quarter ended September 30, 2002 and the first nine months of 2002,
respectively. We do not expect to realize material revenues from this
relationship in the future. Eliminating the effect of the decline in processing
revenues from STAR, revenues from other processing activities within this segment increased
approximately 7% in the third quarter and first nine months of 2002 compared to
the same periods of the prior year. Revenue growth in Electronic Payments does
not correlate directly to the growth in transaction volumes as the revenue
growth is impacted by the fixed fee structure under which we perform processing
for STAR and by the mix of transactions. Summarized below are billable volumes
by general type of transaction, exclusive of ATM Management Services:

|                             |  |                    |     |                   |  |      |     |      |  |  |     |  |  |  |     | 
|---------------------------- |  | ------------------ | --- | ----------------- |  | ---- | --- | ---- |  |  | --- |  |  |  | --- | 
|                             |  | Three Months Ended |     | Nine Months Ended
|                             |  | September 30,      |     | September 30,    
|                             |  |                    |     |                  
|(in billions)                |  | 2002               |     | 2001              |  | 2002 |     | 2001
|                             |  |                    |     |                   |  |      |     |     
|Network & Gateway (EFT, POS) |  |                    | 1.0 |                   |  |      | 0.8 |      |  |  | 2.7 |  |  |  | 2.4 | 
|                            
|                            
|                            
|                            
|Account Verification         |  |                    | 1.4 |                   |  |      | 1.0 |      |  |  | 3.7 |  |  |  | 2.9 | 
|                            
|                            
|                            
|                            
|ACH                          |  |                    | *   |                   |  |      | *   |      |  |  | 0.2 |  |  |  | 0.2 | 



---

|* |  | Less than 0.1 billion
|- |  | ---------------------

ATM Management Servicesrevenue increased $15.2 million, or 77.2%, to $34.9
million in the third quarter of 2002 from $19.7 million in the third quarter of
2001. Revenue from this segment increased $28.5 million, or 52.2%, to $83.1
million in the first nine months of 2002 from $54.6 million in the first nine
months of 2001. These increases are primarily due to the acquisition of ATM
networks from Hanco Systems, Inc. (Hanco), Samsar ATM Company, Inc.
(Samsar), Evergreen Teller Services, Inc. (Evergreen), and Cash Resources,
Inc. (CRI), which contributed an aggregate of $14.4 million in new revenue
during the third quarter of 2002 and $25.1 million in new revenue for the first
nine months of 2002. CRI, the most recent acquisition, contributed an aggregate
of $4.4 million in revenues for the months of August and September 2002 and is
expected to contribute revenues of approximately $6 million in the fourth
quarter of this year. ATM equipment sales also represented new revenue sources for
this segment during the first nine months of 2002 compared to the
first nine months of last year. We currently manage a network of approximately
16,800 ATMs. This amount reflects some attrition we experienced during the
process of converting purchased machines and verifying the inventory of
acquired networks. We continue to review opportunities to acquire other
independent ATM deployment and management companies. Absent further
acquisitions, we do not expect significant revenue growth from this segment in
the immediate future, although we believe this business will exhibit improving
levels of profitability as we seek to eliminate costs and improve efficiencies.

Decision Support and Risk Managementrevenue increased $2.3 million, or 6.8%,
to $36.2 million in the third quarter of 2002 from $33.9 million in the third
quarter of the prior year. Revenue increased $1.9 million, or 1.8%, to $108.3
million in the first nine months of 2002 from $106.4 million in the first nine
months of 2001. Revenues from our ChexSystemsSM suite of products increased
during the third quarter and first nine months of 2002 as compared to the same
periods of the prior year, although this increase was somewhat offset by
declines in sales of our SCANSM products over the comparable periods in the
prior year. The increase in revenues from the ChexSystems service was primarily
attributable to inquiry volume growth driven by our marketing campaign to
encourage financial institutions to prepare for the mandate by the U.S.
government for better customer screening under the USA Patriot Act. The
decrease in revenues from SCAN products was attributable to customer losses and
pricing concessions. We expect that revenues from ChexSystems will continue to
increase in future periods and that revenues from our SCAN product will
continue to show a modest decline.

Professional Servicesrevenues decreased $16.2 million, or 39.8%, to $24.5
million in the third quarter of 2002 from $40.7 million in the third quarter of
the prior year. Revenue decreased $22.2 million, or 22.2%, to $77.9 million for
the first nine months of 2002 from $100.1 million for the first nine months of
2001.

Software sales in the third quarter and first nine months of this year declined
substantially as compared to the prior year periods. During the third quarter
of 2001, software revenue included $18 million of revenues recognized from the
licensing of our EFT software to the STAR Network. We did not experience
software sales of this magnitude during the quarter ended September 30, 2002
and do not believe the results from the third quarter of 2001 will be
replicated in the foreseeable future. The following table illustrates our
revenue generated from software sales:

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|                       |  |                    |       |                   |  |      |        |      |  |   |        |  |  |   |        | 
|---------------------- |  | ------------------ | ----- | ----------------- |  | ---- | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                       |  | Three Months Ended |       | Nine Months Ended
|                       |  | September 30,      |       | September 30,    
|                       |  |                    |       |                  
|(in thousands)         |  | 2002               |       | 2001              |  | 2002 |        | 2001
|                       |  |                    |       |                   |  |      |        |     
|License fees           |  | $                  | 1,589 |                   |  | $    | 18,088 |      |  | $ | 11,237 |  |  | $ | 25,470 | 
|                      
|                      
|                      
|                      
|Maintenance            |  |                    | 3,280 |                   |  |      | 3,423  |      |  |   | 9,988  |  |  |   | 10,219 | 
|                      
|                      
|                      
|                      
|Software modifications |  |                    | 1,875 |                   |  |      | 1,944  |      |  |   | 5,103  |  |  |   | 7,713  | 
|                       |  |                    |       |                   |  |      |        |      |  |   |        |  |  |   |        | 
|                       |  | $                  | 6,744 |                   |  | $    | 23,455 |      |  | $ | 26,328 |  |  | $ | 43,402 | 
|                       |  |                    |       |                   |  |      |        |      |  |   |        |  |  |   |        | 

Revenues from information technology services provided under our contract with
Deluxe were $10.9 million in the third quarter of 2002 as compared to $7.8
million in the third quarter of 2001. For the nine month period, revenues from
Deluxe were $31.5 million in 2002 as compared to $30.7 million in 2001. If
Deluxe fails to spend a minimum of $43 million for software development
services under our agreement with it in any year, it will be obligated to make
payments to us based on a schedule in the contract that is reflective of an
estimate of our lost profits. We currently anticipate that 2002 revenues from
software development activities performed pursuant to this agreement will
approximate $42 million. Revenues from other information technology clients
declined by $0.8 million and $6.7 million in the third quarter and the first
nine months of 2002, respectively, as compared to the same periods for the
prior year as a result of our decision in 2001 to cease offering stand-alone
information technology development services. We do not expect to expand this
aspect of our business significantly in future periods as the sale of IT
consulting services is not a primary focus of our sales efforts.

Business process management (BPM) revenues remained relatively flat in the
third quarter and first nine months of 2002 as compared to the same periods for
the prior year at approximately $6 million and $17 million, respectively. Our
agreement with Deluxe calls for us to provide Deluxe with accounts receivable,
accounts payable and other general accounting and data entry services. Deluxes
annual minimum spending target for these services ranges from $8.1 million in
2000 to $4.2 million in 2004. The target for 2002 is $6.4 million and revenues
from these services were $1.0 million and $3.3 million in the third quarter and
first nine months of this year, respectively. Future growth in our BPM business
will depend on the acquisition of new clients and the expansion of the services
offered to existing clients.

Processing, communication and service costs- This category includes cost of
processing, telecommunications, computer equipment and promotional services.
These costs increased $12.3 million, or 24.3%, to $63.0 million in the third
quarter of 2002 from $50.7 million in the same period of the prior year, and
$19.3 million, or 13.1%, to $166.9 million in the first nine months of 2002
from $147.6 million in the first nine months of 2001. As a percentage of net
revenue, processing, communication and service costs were 43.8% and 40.6% in
the third quarter and first nine months of 2002, respectively, compared to
35.9% and 37.0% for the same periods of 2001. Telecommunications, third party
processing charges and cost of equipment sales have increased along with the
increase in ATM processing and ATM equipment sales. We provide the processing
for approximately 9,500 of the 15,500 U.S. ATM machines in our network and we
expect to complete the transition of the processing for approximately 800
additional U.S. ATMs to our networks by the end of the year. Due to existing
contractual commitments, processing for the approximately 1,300 ATMs we have in
Canada will not likely be transitioned to our networks for a substantial period
of time. Processing for the approximately 5,200 remaining U.S. ATMs, including
the ATMs we acquired from Samsar and Evergreen in the second quarter of 2002
and CRI in the third quarter of 2002, will be transitioned to our networks as
existing contractual commitments expire or as the economics associated with
accelerated contract cancellations make it logical to do so.

Employee costs- Expenditures in this category represent employee compensation
and related employee expenses, benefits and travel. These costs decreased $8.8
million, or 17.1%, to $42.7 million in the third quarter of 2002 from $51.5
million in the third quarter of 2001. Employee costs decreased $17.7 million,
or 11.3%, to $139.4 million in the first nine months of 2002 from $157.1
million in the first nine months of 2001. As a percentage of net revenue,
employee costs were 29.6% and 33.9% in the third quarter and first nine months
of 2002, respectively, compared to 36.5% and 39.4% for the third quarter and
first nine months of 2001, respectively. The primary reason for the decrease in
employee costs is the elimination of performance-based employee compensation
for 2002 due to reduced revenue and earnings expectations. Performance-based
compensation expense decreased $6.3 million and $13.6 million for the third
quarter and first nine months ended September 30, 2002, respectively, from the
same periods of the prior year. We expect that performance-based employee costs
will be reinstituted in 2003.

Although we had approximately 200 more employees in the third quarter of 2002
than we did in the third quarter of 2001, we realized cost savings by
re-deploying certain development responsibilities to our India based operations
and as a result of cost reduction initiatives begun in 2001, such as the
consolidation of our data center operations. Additionally, our

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travel expenditures were less in the third quarter and first nine months of
2002 compared to the same periods of the prior year.

Depreciation and amortization- These costs represent depreciation of
facilities and equipment, amortization of intangible assets, such as
capitalized software costs and acquired customer contracts and, prior to
implementation of SFAS 142 in 2002, amortization of goodwill. Depreciation and
amortization decreased $1.2 million, or 11.7%, to $9.1 million in the third
quarter of 2002 from $10.3 million for the third quarter of 2001 and $2.0
million, or 6.6%, to $28.3 million for the first nine months of 2002 from $30.3
million in the first nine months of 2001. These costs were 6.3% and 6.9% of
revenue in the third quarter and first nine months of 2002, respectively, and
7.3% and 7.6% of revenue for the same periods of the prior year. Goodwill
amortization of $1.0 million and $2.9 million was recorded in the third quarter
and first nine months of 2001, respectively. No such amortization was recorded
in 2002. The decrease in amortization expense was offset by more amortization
of customer contracts recorded in connection with our acquisitions.

Other operating expenses- Expenditures in this category include facility
costs, professional, consulting and temporary services, bad debt, and certain
administrative costs. Other operating expenses remained relatively flat at $9.6
million and $9.5 million for each of the third quarters of 2002 and 2001,
respectively, and decreased $0.9 million, or 3.0%, to $28.8 million for the
first nine months of 2002 from $29.7 million for the same period of the prior
year. As a percentage of revenue, these expenses were 6.7% in each of the
third quarters of 2002 and 2001, respectively, and decreased to 7.0% in the
first nine months of 2002 from 7.4% for the first nine months in 2001. During
the third quarter of 2002, the increased costs due to professional services
associated with responding to the SEC inquiry were offset by reduced spending
for external consultants. During the second quarter of 2002, we established a
collections and credit committee and implemented enhanced collection processes
and systems, thereby improving our ability to pursue slow payors and to refine
our estimates regarding the probability that an account may become
uncollectible. As a result, we reduced our estimate for uncollectible accounts
by $2.5 million. This savings is reflected in the results for the nine months
ended September 30, 2002. We expect to continue to make significant
expenditures for professional services associated with the SEC inquiry in the
upcoming months.

Restructuring and asset impairment charges- In the third quarter of 2002, we
continued the cost reduction efforts we commenced the previous quarter.
Restructuring and asset impairment charges for the third quarter of 2002
include costs to relocate our finance and accounting function from Glendale,
Wisconsin to Scottsdale, Arizona and costs related to under-performing product
lines which have been targeted for elimination as a result of a the strategic
review of our product offerings. These charges consist of $1.1 million in
severance benefits, impairment of fixed assets and lease related costs of $1.2
million, impairment of capitalized software costs of $0.8 million, and the write-down of
net assets held for sale of $3.0 million related to a building in Glendale,
Wisconsin.

Restructuring and asset impairment charges for the first nine months of 2002
represent the total of the second and third quarter charges. These charges
consist of $4.5 million in severance, impairment on fixed assets and lease
related costs of $6.9 million, a write-down of assets held for sale of $3.0
million and a net charge of $2.1 million related to software impairment and
other charges. We expect to pay a significant portion of the severance charges
by the end of the first quarter in 2003. Of the lease related-costs accrued due
to the exit of facilities, approximately $2.1 million relates to the write off
of equipment and leasehold improvements, and the remainder of $4.8 million
relates to estimated net lease costs for closed facilities. We expect the
personnel reductions reflected in the severance charge to positively impact our
cash flow in the second half of 2003. The charge for lease costs will not
change our 2003 cash flows as our rental obligations will continue
until the expiration of the lease or until we can sub-let the related property.

Results for the first nine months of 2001 included a restructuring charge of
$3.2 million related to the closure of our Bothell, Washington facility.

Reversal of provisions for
contract losses- In the third quarter of 2002, we recorded a $2.0
million benefit related to a reduction in our estimate of future losses on
certain government EBT contracts. A similar benefit was taken in the third
quarter of 2001 for $2.5 million.

Income from operations- Income from operations decreased $6.3 million, or
28.9%, to $15.5 million in the third quarter of 2002 compared to $21.8 million
in the third quarter of 2001, and remained flat at $33.5 million for the first
nine months of 2002 and 2001. As a percentage of net revenue, income from
operations was 10.8% and 8.1% for the third quarter and first nine months of
2002, respectively, compared to 15.4% and 8.4% for the same periods of the
prior year. Results for

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the third quarter and first nine months of 2002 include restructuring and other
charges (asset impairment charges, net of credits from the reversal of
provisions for contract losses) of $4.1 million and $14.5 million, respectively, and the results for
the third quarter and first nine months of 2001 include a net benefit on
contract loss reserve adjustments of $2.5 million and a restructuring charge of
$3.2 million, respectively. Also, in accordance with SFAS No. 142, we ceased
amortization of goodwill in 2002. Goodwill amortization for the third quarter
and first nine months of 2001 was approximately $1.0 million and $2.9 million,
respectively.

Excluding the restructuring and other charges in both periods and eliminating
the goodwill amortization for 2001, income from operations decreased $0.7
million, or 3.4%, for the third quarter of 2002 compared to 2001 and increased
$10.9 million, or 29%, for the first nine months of 2002 compared to the prior
year. As a percentage of revenue, income from operations, excluding
restructuring and other charges and goodwill amortization, decreased to 13.6%
in the third quarter of 2002 from 14.4% in the same period of the prior year
and increased to 11.7% for the first nine months of 2002 from 9.3% for the
same period of the prior year. The decrease during the third quarter of 2002 is
due primarily to the higher concentration of software sales in the third
quarter of 2001. The improvement for the first nine months of 2002 is
attributable to the elimination of performance-based employee compensation in
2002 and the downward revision of our allowance for doubtful accounts in the
second quarter of 2002. These expense reductions were offset in part by a
change in revenue mix to more recurring but lower margin product lines. During
2003, we plan to continue to focus on our cost containment efforts.

Other income(expense)-net- Other income(expense)-net was a net expense of $0.2
million during the third quarter of 2002 compared to a net expense of $0.3
million for the same period of the prior year, and a net other income of $0.4
million for the first nine months of 2002 compared to $0.6 million for the same
period of the prior year. Interest earned on cash and cash equivalents
decreased $0.2 million to $0.4 million in the third quarter of 2002 as compared
to $0.6 million for the same period of the prior year and decreased by $1.4
million to $1.1 million for the first nine months in 2002 as compared to $2.5
million for the same period of the prior year. These decreases were due to
reduced interest rates. Additionally, interest expense, equity method
amortization and other expense decreased during both the third quarter and
first nine months of 2002.

Provision for income taxes-The provision for income taxes was $4.6 million
and $10.2 million in the third quarter and first nine months of 2002,
respectively, compared to $7.8 million and $12.4 million for the same periods
of the prior year, resulting in annualized effective tax rates of 30% for 2002
and 36.4% for 2001. The decrease in our effective tax rate is
primarily a result of the
cessation of goodwill amortization beginning in 2002 which was non-deductible
for tax purposes, and also a change in the composition of our
projected earnings to reflect a higher proportional share of our projected
consolidated income by our Indian subsidiary. Our Indian software development
and business process management operations qualify for tax incentives
associated with businesses that operate within designated geographic locations
within India. Such incentives generally provide us with exemptions from Indian
income tax on certain business income generated from these operations. As a
result of a recent change in Indian tax law, effective April 1, 2002 and
through March 31, 2003, 10% of this previously tax-exempt income will be
subject to Indian income tax at the rate of 35%. The remaining tax incentives
phase out through March 2009.

Business Segment Information-The following table presents, for the periods
indicated, operating income by segment as a percentage of segment revenue, and
the unallocated corporate expenses and income from operations as a percentage
of total revenue:

|                               |                                      |                        |  |                    |      |                   |  |      |      |      |  |       |     |   |  |       |     |  
|------------------------------ | ------------------------------------ | ---------------------- |  | ------------------ | ---- | ----------------- |  | ---- | ---- | ---- |  | ----- | --- | - |  | ----- | --- | -
|                               |                                      |                        |  | Three Months Ended |      | Nine Months Ended
|                               |                                      |                        |  | September 30,      |      | September 30,    
|                               |                                      |                        |  |                    |      |                  
|                               |                                      |                        |  | 2002               |      | 2001              |  | 2002 |      | 2001
|                               |                                      |                        |  |                    |      |                   |  |      |      |     
|Income (loss) from operations: |                                      |                        |  |                    |      |                   |  |      |      |      |  |       |     |   |  |      
|                              
|                              
|                              
|                              
|                               | Electronic payments                  |                        |  | 35.6               | %    |                   |  | 28.5 | %    |      |  | 30.6  | %   |   |  | 26.2  | %  
|                              
|                              
|                              
|                              
|                               | ATM management services              |                        |  | 3.7                |      |                   |  | 8.7  |      |      |  | 3.4   |     |   |  | 2.4   |    
|                              
|                              
|                              
|                              
|                               | Decision support and risk management |                        |  | 23.8               |      |                   |  | 6.8  |      |      |  | 15.6  |     |   |  | 8.6   |    
|                              
|                              
|                              
|                              
|                               | Professional services                |                        |  | 22.1               |      |                   |  | 44.7 |      |      |  | 22.7  |     |   |  | 29.5  |    
|                              
|                              
|                              
|                              
|                               | Corporate                            |                        |  | (11.9              | )    |                   |  | (9.7 | )    |      |  | (11.5 | )   |   |  | (10.6 | )  
|                              
|                              
|                              
|                              
|                               |                                      | Income from operations |  |                    | 10.8 | %                 |  |      | 15.4 | %    |  |       | 8.1 | % |  |       | 8.4 | %

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Operating income in the Electronic Payments business segment increased to $17.3
million in the third quarter of 2002 from $13.4 million in the third quarter of
the prior year, and increased to $43.5 million in the first nine months of 2002
from $36.1 million in the first nine months of 2001. As a percent of net
segment revenues, operating margins were 35.6% and 30.6% for the quarter and
nine months ended September 30, 2002, respectively, an increase over the 28.5%
and 26.2% we reported for the same periods of the prior year. During the
current quarter, we recorded $1.2 million in restructuring and
asset impairment charges, offset by a $2.0 million credit from
the reversal of provision for contract losses, and had $2.3 million
less expense for performance-based compensation. The absence of any provision
for incentive compensation resulted in our recording $3.2 million less in
compensation expense for the first nine months of 2002 than we did for the
comparable period in the prior year. Due to cost reduction measures implemented
in 2002, operating margins improved for both the third quarter and first nine
months of 2002 despite the net increase in expenses from the 2002 restructuring
and asset impairment charges.

Operating income in the ATM Management Services business segment decreased to
$1.3 million in the third quarter of 2002 from $1.7 million in the third
quarter of the prior year, and increased to $2.8 million in the first nine
months of 2002 from $1.3 million in the first nine months of 2001. As a percent
of net segment revenues, operating margins were 3.7% and 3.4% for the quarter
and nine months ended September 30, 2002, a decrease from the margin of 8.7%
for the third quarter of 2001 and an improvement over the margin of 2.4% we saw
during the first nine months of 2001. Revenues in this segment increased due
primarily to acquisitions. We expect to see further margin improvement in this
business in future periods as our integration efforts proceed as efficiency
gains are achieved through the consolidation of the operations of acquired
businesses, including the transitioning of acquired ATMs to our internal
processing systems.

Operating income in the Decision Support and Risk Management business segment
increased to $8.6 million in the third quarter of 2002 from $2.3 million in the
same period of the prior year, and increased to $16.9 million in the first nine
months of 2002 from $9.1 million in the first nine months of 2001. As a percent
of net segment revenues, operating margins were 23.8% and 15.6% for the quarter
and nine months ended September 30, 2002, an increase from the 6.8% and 8.6%
recorded for the same periods of the prior year. During the current quarter, we
recorded $0.7 million in restructuring and asset impairment charges in the
Decision Support and Risk Management segment related to severance, lease
expense and asset impairments, and had $1.3 million less expense for
performance-based compensation. We also recorded $5.5 million in restructuring
and asset impairment charges during the first nine months of 2002 compared to
$3.2 million for the same period of the prior year. We recorded $2.4 million
less expense for performance-based compensation for the first nine months of
2002 than we did in 2001. The net decrease in expenses resulted in improved
operating margins for both the third quarter and first nine months of 2002.

Operating income in the Professional Services business segment decreased to
$5.4 million in the third quarter of 2002 from $18.2 million in the third
quarter of the prior year, and decreased to $17.7 million in the first nine
months of 2002 from $29.5 million in the first nine months of 2001. As a
percent of net segment revenues, operating margins were 22.1% and 22.7% for the
quarter and nine months ended September 30, 2002, a decrease from the 44.7% and
29.5% for the same periods of the prior year. During the current quarter, we
had $2.1 million less in performance-based compensation expense. We also
recorded $4.9 million less in such compensation expense for the first nine
months of 2002 than we did in 2001, as we do not expect to pay employee bonuses
in 2002. Despite the reduction of expenses in 2002, the reduction in margins
for both the third quarter and first nine months of 2002 is primarily due to
the $16.7 million and $17.1 million reduction of software
sales, respectively, from the comparable periods of the prior year.

Corporate expenses include, but are not limited to, legal, accounting, human
resources, risk management, and executive expenses. These expenses increased to
$17.1 million in the third quarter of 2002 from $13.8 million in the third
quarter of the prior year, and increased to $47.4 million in the first nine
months of 2002 from $42.5 million in the first nine months of 2001. During the
current quarter, we recorded $4.2 million in restructuring and asset impairment
charges as corporate expenses which were related to severance, lease expense
acceleration and asset impairments, and had $0.6 million less in
performance-based compensation expense than in the prior year. We also recorded
$6.8 million in restructuring and asset impairment charges and had $3.1 million
less in performance-based compensation expense for the first nine months of
2002 compared to the same period last year. Goodwill amortization, which was
discontinued in 2002, was $1.0 million and $2.9 million in the third quarter
and first nine months of 2001, respectively. These net reductions in expense
were offset by an increase in certain corporate expenses due to increased
professional service fees related to the SEC inquiry, facility rental costs
from the expansion of our facilities in Scottsdale, Arizona and rising costs
for employee health benefits.

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Liquidity, Capital Resources, and Financial Condition-
At September 30, 2002, net working capital was $138.0 million, compared to
$117.8 million at December 31, 2001. Cash and cash equivalents, including cash
in ATMs of approximately $11 million, totaled $106.9 million at September 30,
2002, an increase of $5.0 million from December 31, 2001. This increase was
primarily the result of cash provided by operating activities. At September 30,
2002, we had $5.2 million of restricted cash that we temporarily hold in
custodial accounts on behalf of clients and $3.8 million of deposits subject to
compensating balance arrangements.

Our operations and our capital expenditure and acquisition requirements are
financed primarily through cash flow from operations. Short-term liquidity
needs and long term capital expenditure requirements will be provided from cash
and cash equivalents on hand and cash flow from operations.

We have terminated our $20 million revolving credit facility. We never borrowed
any money under this facility, although we did use it to issue letters of
credit in the ordinary course of business from time to time. At September 30,
2002 the aggregate value of outstanding letters of credit of $1.0 million was
collateralized with a $1.0 million deposit at the issuing bank.

We have additional outstanding commercial commitments consisting mainly of
guarantees for contract performance, that include letters of credit, bank
guarantees and performance bonds. As of September 30, 2002 and December 31,
2001, our total obligation under these commercial commitments was $8.6 million
and $11.5 million, respectively, over a five-year term. As of December 31, 2001
our contractual cash obligations for capital and operating leases and
outsourcing and maintenance obligations totaled $128.3 million through December
31, 2006. Our contractual cash obligations had not materially changed from this
amount at September 30, 2002.

The following table sets forth a summary of our cash flow activity and should
be read in conjunction with our unaudited consolidated statements of cash
flows:

|                                          |  |                       |         |      |  |   |         |  
|----------------------------------------- |  | --------------------- | ------- | ---- |  | - | ------- | -
|                                          |  | Summary of Cash Flows
|                                          |  |                      
|                                          |  | Nine Months Ended    
|                                          |  | September 30,        
|                                          |  |                      
|(in thousands)                            |  | 2002                  |         | 2001
|                                          |  |                       |         |     
|Cash provided by operating activities     |  | $                     | 57,405  |      |  | $ | 19,271  |  
|                                         
|                                         
|                                         
|                                         
|Cash used in investing activities         |  |                       | (52,848 | )    |  |   | (23,456 | )
|                                         
|                                         
|                                         
|                                         
|Cash provided by financing activities     |  |                       | 476     |      |  |   | 11,319  |  
|                                          |  |                       |         |      |  |   |         |  
|Net increase in cash and cash equivalents |  | $                     | 5,033   |      |  | $ | 7,134   |  
|                                          |  |                       |         |      |  |   |         |  

Net cash flows from operating activities provided $57.4 million and $19.3
million for the first nine months of 2002 and 2001, respectively. The increase
in operating cash flow compared to the same period last year resulted from
improved collection procedures and more effective management of working capital
accounts. During the nine months ended September 30, 2002, accounts receivable
decreased by $9.2 million, whereas accounts receivable increased by $41.7
million for the same period of the prior year. The increase last year was due
to the growth of our Company, receivables from large software sales
made at the end of the prior year quarter, and also because billings to Deluxe were shown as
receivables in 2001 as opposed to intercompany balances which were settled at
December 31, 2000.

Our investing activities used cash of $52.8 million for the nine months ended
September 30, 2002, compared to $23.5 million for the same period last year. We
spent $17.8 million to purchase systems and equipment and develop software in
the first nine months of 2002, compared to like capital expenditures of $22.3
million in the same period last year. We also completed the acquisitions of
Hanco, Samsar, Evergreen and CRI for $35.1 million in the first nine months of
2002.

Financing activities provided $0.5 million and $11.3 million in cash for the
nine months ended September 30, 2002 and 2001, respectively. During the nine
months ended September 30, 2002, we repaid $2.3 million of long-term debt and
received $2.8 million from sales of common stock pursuant to exercise of stock
options and our employee stock purchase plan. During the same period of the
prior year, we used cash to repay debt of $7.0 million, obtained $8.5 million
from the release of a time deposit placed as collateral for that debt and we
received $9.8 million from sales of common stock pursuant to exercise of stock
options and the employee stock purchase plan.

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Recent Developments-

Transactions with STAR  In 2001, Concord EFS acquired the STAR debit network,
formerly our largest transaction processing customer and notified us that it
intended to terminate STARs processing agreement with us and perform the
processing for this network at its own data centers. As part of the transition
of this activity, STAR licensed our EFT software and contracted for the
long-term maintenance thereof and for professional services to assist in the
migration effort. The licenses to STAR represented our largest software
licensing transactions to date. The transition of the processing for the STAR
network to Concord EFS was completed at the end of the third quarter of 2002.
We do not expect to realize material revenues from this relationship in the
future.

Including software license and maintenance fees and fees for processing
transactions for STAR and other Concord affiliates, Concord EFS accounted for
approximately $7.6 million of revenues (excluding revenues derived from
reimbursed expenses) during the quarter ended September 30, 2002, as compared
to $26.7 million for the quarter ended September 30, 2001. Concord EFS
accounted for approximately $26.9 million of revenues (excluding revenues
derived from reimbursed expenses) during the first nine months of 2002,
compared to $44.7 million for the same period in 2001. We currently estimate
that the total net revenues we will recognize from our relationship with
Concord EFS in 2002 will approximate $28 million (excluding revenues derived
from reimbursed expenses), compared to $57.4 million in 2001. Of this amount,
approximately $16 million relates to the provision of transaction processing
services to the STAR network during thefirst nine months of the year and
approximately $4 million relates to a software sale that occurred during the
first quarter of 2002. We do not expect the remaining revenues from Concord
EFS affiliate Primary Payment Systems, Inc. to be affected by the termination
of STARs processing agreement.

Forward Looking Statements-

We are targeting revenues of
approximately $539 million to $545 million for the
full year. These amounts include approximately $29.5 million of revenue
associated with the adoption by the Company of EITF Issue 01-14. The full year
revenue outlook gives effect to our acquisitions of Hanco, Samsar and Evergreen
and Cash Resources, Inc. We do not presently expect to acquire additional ATM
management assets during the balance of the year.

The annualized effective tax rate for 2002 is expected to be approximately 30
percent.

Capital expenditures for 2002 are expected to be $25 million.

Diluted shares for 2002 are assumed to
be 46.9 million.

Diluted earnings per share for 2002
are currently expected to approximate $0.70
to $0.80 before restructuring and other charges.

Results for the fourth quarter are expected to be in line with expectations for
the full year.

Our actual future results could differ materially from those presently
anticipated due to a variety of factors. Some of these factors are discussed in
Part II, Item 5 of this Quarterly Report on Form 10-Q.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the potential for loss due to adverse changes in the
fair value of financial instruments. We operate internationally and are subject
to potentially adverse movements in foreign currency exchange rates and
interest rates. These exposures may change over time as our business evolves
and could have an adverse impact on our financial results. We have not entered
into any derivative instruments or hedging contracts to reduce our exposure to
adverse foreign currency rate or interest rate changes.

Currently, we receive non-U.S. dollar denominated revenues and incur non-U.S.
dollar denominated operating expenses in the United Kingdom, India and Canada.
We also have assets located in these countries. The principal currencies
creating foreign exchange rate risk for us are the British pound, Indian rupee
and Canadian dollar. For the quarter and nine months ended September 30, 2002,
less than 10% of our net revenues and operating expenses were denominated in
non-U.S. dollar currencies. We do not believe that our net income for the
quarter and nine months ended September 30, 2002 would have been materially
affected if the U.S. dollar had appreciated or depreciated by 10% against the
British pound, the Indian rupee or the Canadian dollar.

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Changes in interest rates could impact our anticipated interest income on cash
equivalents and interest expense on variable short-term debt. A 10% adverse
change in interest rates from the interest rates in effect at the end of 2001
would not, however, have a material adverse effect on our net income or
financial condition for 2002.




ITEM 4. CONTROLS AND PROCEDURES

The Company seeks to maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Companys
Securities Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and forms and that such
information is accumulated and communicated to the Companys management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the Companys disclosure procedures, management
realized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable, and not absolute, assurance of achieving
the desired control objectives, and management necessarily was required to
apply its judgement in evaluating the cost-benefit relationship of possible
controls and procedures.

During the 90-day period to the date of this report, an evaluation was
performed under the supervision and with the participation of our Companys
management, including the Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures. Based upon that evaluation, the Chief
Executive Officer and the Chief Financial Officer concluded that the Companys
disclosure controls and procedures are reasonably effective, although management notes
that the document collection and analysis procedures associated with
its recent review of various transactions that
occurred in 2000 and 2001 (see Note 13 to condensed consolidated
financial statements) prevented the Company from filing this Quarterly
Report on Form 10-Q on a timely basis. The Companys Chief Executive Officer
and Chief Financial Officer do not presently believe that the circumstances requiring
this delay are likely to be repeated and expect that future filings
with the SEC will be made on a timely basis. Subsequent to the date of the
afore-mentioned evaluation, there have been no significant changes in the
Companys internal controls or in other factors that could significantly affect
these controls and no corrective actions taken with regards to significant
deficiencies or material weakness in such controls.




PART II  OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

On March 8, 2002, we received a letter from the Securities and Exchange
Commission (the SEC) stating that the SEC is conducting an inquiry of us and
requesting our voluntary assistance in connection with the provision of certain
documents relating to our 2001 financial results and certain transactions
between us and Access Cash International L.L.C., among other things. The letter
from the SEC states that the inquiry is non-public and that it should not be
construed as an indication that the SEC believes any violation of law has
occurred. In October and November 2002, the SEC staff requested additional information from
us related to certain of the matters that were the subject of the accounting
review we announced on November 14, 2002 and which we recently completed. We
have been cooperating fully with the SEC and we intend to continue to do so. We
may, however, be the subject of additional inquiries or become subject to a
fine or other liabilities.




ITEM 5. OTHER INFORMATION

RISK FACTORS AND CAUTIONARY STATEMENTS.

When used in this Quarterly Report on Form 10-Q/A and in future filings by the
Company with the Securities and Exchange Commission, in our press releases,
letters and reports to stockholders and in oral statements made by our
representatives, the words or phrases should result, are expected to,
targeted, will continue, will approximate, is anticipated, estimate,
project or similar expressions are intended to identify forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are necessarily subject to certain risks and
uncertainties, including those discussed below, that could cause our actual
results to differ materially from our historical experience and our present
expectations or projections. Caution should be taken not to place undue
reliance on any such forward-looking statements, which speak only as of the
date made. The factors listed below could affect our financial performance and
could cause our actual results for future periods to differ from any opinions
or statements expressed with respect thereto. Such differences could be
material and adverse. We will not undertake and specifically decline any
obligation to publicly release the result of any revisions that may be made to
any forward-looking statements to reflect events or circumstances occurring
after the date of such statements or to reflect the occurrence of anticipated
or unanticipated events.

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WE ARE UNABLE TO PREDICT THE RESULTS
OF THE INQUIRY WE HAVE RECEIVED FROM THE SEC.

On March 8, 2002, we received a letter from the Securities and Exchange
Commission (the SEC) stating that the SEC is conducting an inquiry of us and
requesting our voluntary assistance in connection with the provision of certain
documents relating to our 2001 financial results and certain transactions
between us and Access Cash International L.L.C., among other things. The letter
from the SEC states that the inquiry is non-public and that it should not be
construed as an indication that the SEC believes any violation of law has
occurred. In October and November 2002, the SEC staff requested additional information from
us related to certain of the matters that were the subject of the accounting
review we announced on November 14, 2002 and which we recently completed. We
have been cooperating fully with the SEC and we intend to continue to do so. We
may, however, be the subject of additional inquiries or become subject to a
fine or other liabilities.

We are unable to predict when the SEC inquiry may be concluded with any degree
of precision and we expect to continue to incur significant expenditures for
professional services associated with our efforts to respond to the inquiry
process. At this time, the SECs inquiry is informal in nature.
It is likely that at some point the SEC staff may seek from the SEC
a formal order of investigation, which would allow it, for example,
to subpoena information from third parties. Regardless of the status
of the inquiry, the Company intends to continue to cooperate with the
SEC staff in its inquiry and provide information on a voluntary basis.

ESTIMATES OF FUTURE FINANCIAL RESULTS ARE INHERENTLY UNRELIABLE.

From time to time, our representatives make public predictions or forecasts
regarding the Companys future results, including estimates regarding future
revenues, expense levels, tax rates, capital expenditures, earnings or earnings
from operations. Any forecast regarding our future performance reflects various
assumptions. These assumptions are subject to significant uncertainties, and,
as a matter of course, many of them will prove to be incorrect. Further, the
achievement of any forecast depends on numerous factors (including those
described in this discussion), many of which are beyond our control. As a
result, there can be no assurance that our performance will be consistent with
any management forecasts or that the variation from such forecasts will not be
material and adverse. Investors are cautioned not to base their entire analysis
of our business and prospects upon isolated predictions, but instead are
encouraged to utilize the entire available mix of historical and
forward-looking information made available by us, and other information
relating to our Company and its products, when evaluating our prospective
results of operations.

CONSOLIDATION IN THE INDUSTRIES WE SERVE MAY ADVERSELY AFFECT OUR ABILITY TO
SELL OUR PRODUCTS AND SERVICES.

Mergers, acquisitions and personnel changes at financial institutions and
electronic funds transfer networks may adversely affect our business, financial
condition and results of operations. Currently, the banking and EFT industries
are consolidating, causing the number of financial institutions and ATM
networks to decline. This consolidation could cause us to lose:



| |  | current and potential customers;                                                                                                                                                    
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | market share if the combined entity determines that it is more
efficient to develop in-house products and services similar to ours or
use our competitors product and services; and
| 
| |  | revenue if the combined institution is able to negotiate a greater
volume discount for, or discontinue the use of, our products and
services.                                       

For example, one of the larger customers of our electronic payments business,
the STAR network, was purchased by one of our competitors, Concord EFS. We do
not expect to realize material revenues from STAR during the fourth quarter of
2002 or thereafter.

OUR ACQUISITION OF ATM MANAGEMENT COMPANIES MAY NOT BE SUCCESSFUL.

Since October 2001, we have been acquiring independent ATM management companies
and we now operate the largest network of off-premise ATMs in North America.
For the nine months ended September 30, 2002, this business segment contributed
revenues of $83.1 million, or 20.2% of our total revenues, at an operating
margin of 3.4%.

Our ability to improve the margins of this business will require us to
effectively integrate the operations of acquired businesses into our
organization, efficiently manage the deployment of the ATMs and generate
additional sources of revenue from the installed ATM base and the sale of new
machines. A key component of our integration efforts is the migration of the
processing of the transactions generated at our ATMs from third parties to our
own data centers. We provide the processing for 9,500 of the 15,500 ATMs we
have deployed in the United States and we plan to convert

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approximately 800 of the remaining machines by the end of 2002. Processing for
the approximately 5,200 remaining U.S. ATMs, including the ATMs we acquired
from Samsar, Evergreen, and CRI in the second and third quarters of 2002, will
be transitioned to our networks as existing contractual commitments expire or
as the economics associated with accelerated contract cancellations makes it
logical to do so. The process of conversion also involves a physical count of
the ATM machines in our network and we have seen that the ATM inventories of
acquired networks tend to be smaller than represented on occasion. We are
reviewing our contractual options in this regard. All of the conversions
require a degree of cooperation from existing third-party processors and so no
assurance can be given that we will be successful in our conversion efforts. If
we are not successful in our effort to improve the revenues and profitability
of our ATM business, our future results of operations will be adversely
affected. In addition, the expansion of the installed base of ATMs may require
the application of increased amounts of cash to keep the machines appropriately
supplied with cash for withdrawal by consumers.

Our ability to expand through acquisitions, including through our acquisition
of ATM providers, involves many other risks, including:



| |  | the operations, technology and personnel of any acquired companies may be difficult to integrate;           
|- |  | ------------------------------------------------------------------------------------------------------------
| 
| |  | the allocation of management resources to consummate these transactions may disrupt our day to day business;
| 
| |  | acquired businesses may not achieve anticipated revenues, earnings or cash flow.                            

In addition, regulations are currently being considered regarding the
application of the Americans with Disabilities Act to ATM networks. Although
any regulations could result in increased opportunities for ATM sales by us,
they could also require us to retire or retrofit portions of the ATM base we
own. It is also possible that existing ATM networks will be exempted from any
future regulations. We are unable at this time to determine whether, and to
what extent, any final regulations will impact our business.

WE FACE INTENSE COMPETITION IN ALL AREAS OF OUR BUSINESS, AND IF WE DO NOT
COMPETE EFFECTIVELY, OUR BUSINESS WILL BE HARMED.

We face intense competition from a number of companies. Further, we expect that
competition will intensify as the movement towards increasing consolidation
within the financial services industry continues. Many of our competitors have
significantly greater financial, technical and marketing resources, greater
name recognition and a larger installed customer base than we do.

In the electronic payment management market, our principal competitors include:



| |  | third party network and credit card processors, including First Data, Equifax, Total System Services, Electronic Data
Systems, Concord EFS and Alliance Data Systems;       
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | financial institutions that have developed internal processing capabilities or services similar to ours, including Bank of
America, Metavante and Fifth Third National Bank;
| 
| |  | electronic data interchange and cash management providers, including Fiserv, CheckFree, Metavante, EDS and Fundtech;                                                        
| 
| |  | electronic funds transfer software providers, including Transaction Systems Architects, SLMsoft, Oasis, Mosaic and PaySys;
and                                              
| 
| |  | national information database companies and other content providers, including Equifax, Experian and Trans Union.                                                           

In the market for electronic transaction processing, the principal factors on
which we compete are price and service levels. The future growth of our
revenues in this market is dependent upon securing an increasing volume of
transactions. If we cannot control our transaction processing expenses, we may
not remain price competitive and our revenues will be adversely affected. Our
revenues can also be adversely affected by pricing concessions we make in order
to retain our existing customers or attract new customers.

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In the market for ATM deployment and management services, the primary basis of
competition is price and service levels. Our ability to sell additional
machines and processing contracts in this market is dependant on our ability to
control our costs while maintaining effective levels of customer service. If we
are not successful in these efforts we will not achieve the growth objectives
we have for this business.

Competition for our decision support and risk management products is based
primarily on the quantity and quality of the data available to us for this
purpose and, to a somewhat lesser degree, price. Our competitive position in
these markets could be harmed if our competitors were able to compile different
data sources and analytical capabilities that proved to be more effective than
our products. In addition, competitive pressure on our check verification
business is increasing and we expect that the revenues we receive from this
business will continue to decline in future periods.

Our business process outsourcing and professional services offerings compete
primarily on the basis of the quality of service levels and, to some degree,
price. The future growth of this aspect of our business is dependent on
demonstrating to our current and prospective customers that we are a dependable
and efficient service provider.

In addition to our current competitors, we expect substantial competition from
established and new companies. No assurance can be given that we will be able
to compete effectively against current and future competitors. Increased
competition could result in price reductions, reduced gross margins or loss of
market share.

IF WE EXPERIENCE SYSTEM FAILURES, THE PRODUCTS AND SERVICES WE PROVIDE TO OUR
CUSTOMERS COULD BE DELAYED OR INTERRUPTED, WHICH WOULD HARM OUR BUSINESS AND
REPUTATION AND RESULT IN THE LOSS OF CUSTOMERS.

Our ability to provide reliable service largely depends on the efficient and
uninterrupted operations of our computer and telecommunications network systems
and our data centers. Any significant interruptions could severely harm our
business and reputation and result in a loss of revenue and customers. Our
systems and operations could be exposed to damage or interruption from fire,
natural disaster, unlawful acts, power loss, telecommunications failure,
unauthorized entry and computer viruses. Although we have taken steps to
prevent system failures, we cannot be certain that our measures will be
successful and that we will not experience service interruptions. Further, our
property and business interruption insurance may not be adequate to compensate
us for all losses or failures that may occur.

LEGISLATION RELATING TO CONSUMER PRIVACY PROTECTION COULD HARM OUR ABILITY TO
COLLECT AND USE DATA, INCREASE OUR OPERATING COSTS OR OTHERWISE HARM OUR
BUSINESS.

Existing and new laws and regulations relating to consumer privacy protection
could harm our ability to collect and use consumer data, increase our operating
costs or otherwise harm our business. We collect personal data about consumers
for use in our decision support and risk management products. Due to the
increasing public concern over consumer privacy rights, Congress and state
legislatures have adopted and are considering adopting laws and regulations
restricting the purchase, sale and sharing of personal information about
consumers. For example, some states have restricted the sale of motor vehicle
records, including drivers license lists, and some states refuse to disclose
this information at all.

The federal financial modernization law, known as the Gramm-Leach-Bliley Act,
imposes significant consumer information privacy requirements on any entity
engaged in the business of providing financial services, including entities
that provide services to financial institutions. Federal agencies, such as the
Comptroller of the Currency and the Federal Trade Commission, have issued
regulations to implement these requirements. The Act requires covered companies
to develop and implement policies to protect the security and confidentiality
of consumers nonpublic personal information and to disclose those policies to
consumers before a customer relationship is established and annually
thereafter. In addition, the Act requires covered companies to give an opt-out
notice to consumers before sharing consumer information with third parties. The
opt-out notice requirement in the Act is subject to several exceptions for
credit reporting and fraud prevention purposes. Although we believe these
exceptions apply to our business, government agencies could interpret their
regulations in a manner that could expand the scope of the Act in ways which
could adversely affect our business. In addition, even if the regulations do
not affect us directly, uncertainty over the scope of the regulations could
make financial institutions unwilling or reluctant to share consumer-related
information with us.

The Gramm-Leach-Bliley Act does not prohibit state legislation or regulations
that are more restrictive on our collection and use of data. More restrictive
legislation or regulations have been introduced in the past and could be
introduced in the future in Congress and the states. For example, in the past
legislation has been proposed which would require consumers to opt in to any
plan which would allow their nonpublic personal information to be disclosed. We
are unable to predict

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whether more restrictive legislation or regulations will be adopted in the
future. Any future legislation or regulations could have a negative impact on
our business.

In addition, the pre-emptive provisions of the Federal Fair Credit Reporting
Act, which governs our SCAN(SM) and ChexSystems(SM) businesses, are currently
scheduled to expire in January 2004. The expiration of these provisions means
that state governments could also seek to issue legislation or regulations in
this area. The creation of additional state regulations could complicate our
compliance efforts and otherwise have a negative impact on our business. We are
unable to predict whether the Federal pre-emptive provisions will be continued
or whether any state would thereafter seek to implement more stringent
requirements if they are not so continued.

IF THE SECURITY OF OUR DATABASES IS COMPROMISED,
OUR REPUTATION COULD SUFFER AND CUSTOMERS MAY NOT BE WILLING TO USE OUR PRODUCTS AND SERVICES.

If the security of our databases is compromised, our business could be
materially adversely affected. In our electronic payments and risk management
businesses, we collect personal consumer data, such as names and addresses,
social security numbers, drivers license numbers, checking and savings account
numbers and payment history records. Unauthorized access to our database could
result in the theft or publication of personal confidential information and the
deletion or modification of personal records or otherwise cause interruptions
in our operations. These concerns about security are increased when we transmit
information over the Internet. A security or privacy breach may:



| |  | deter customers from using our products and services;                          
|- |  | -------------------------------------------------------------------------------
| 
| |  | harm our reputation;                                                           
| 
| |  | expose us to liability;                                                        
| 
| |  | increase our operating expenses to remediate problems caused by the breach; and
| 
| |  | decrease market acceptance of electronic commerce transactions in general.     

WE ARE DEPENDENT ON DELUXE FOR A SIGNIFICANT PORTION OF OUR REVENUE.

During the first nine months of 2002, net sales to Deluxe represented 8.9% of
our total revenues before reimbursed expenses. On a year-over-year basis,
however, total revenues from Deluxe declined by 2.5% to $34.9 million during
the first nine months of 2002 from $35.8 million during the comparable period
in 2001. Although Deluxe has established minimum spending targets of $43
million per year through March 31, 2005 for software development and
maintenance services it obtains from us, we currently expect that it will
purchase approximately $42 million of software development and maintenance
services from us in 2002. In addition, although Deluxes annual minimum
spending target for business process management services provided by us in 2002
is $6.4 million, Deluxe has purchased only $3.3 million of such services during
the first nine months of this year. As a result, we believe that 2002 revenues
from Deluxe for these services will be approximately $2.0 million less than the
targeted amount. Further efforts at expense reduction by Deluxe could cause the
revenues we receive from Deluxe to continue to decline. The loss of Deluxe as a
customer or a continuing material reduction in the amount of services it orders
from us would materially adversely affect our future results of operations and
financial condition.

WE MAY EXPERIENCE SOFTWARE DEFECTS, DEVELOPMENT DELAYS AND INSTALLATION
DIFFICULTIES, WHICH WOULD HARM OUR BUSINESS AND REPUTATION AND EXPOSE US TO
POTENTIAL LIABILITY.

Our services and products are based on sophisticated software and computing
systems and we often encounter delays when developing new products and
services. Further, the software underlying our products and services has
occasionally contained and may in the future contain undetected errors or
defects when first introduced or when new versions are released. In addition,
we may experience difficulties in installing or integrating our products and
technologies on platforms used by our customers or in new environments, such as
the Internet. Defects in our software products, errors or delays in the
processing of electronic transactions or other difficulties could result in:



| |  | delay in market acceptance;  
|- |  | -----------------------------
| 
| |  | additional development costs;

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| |  | diversion of technical and other resources;
|- |  | -------------------------------------------
| 
| |  | loss of customers;                         
| 
| |  | negative publicity; or                     
| 
| |  | exposure to liability claims.              

Although we attempt to limit our potential liability for warranty claims
through disclaimers and limitation-of-liability provisions in our license and
client agreements, we cannot be certain that these measures will be successful
in limiting our liability.

THERE ARE A NUMBER OF RISKS ASSOCIATED WITH OUR INTERNATIONAL SALES AND
OPERATIONS THAT COULD HARM OUR BUSINESS.

Because we currently sell some of our products and services in Europe,
Australia and Canada, our business is subject to risks associated with doing
business internationally. Also, we may not be successful in selling our
services outside of the United States. In the first nine months of 2002, we
generated approximately 8.7% of our net sales outside of the United States. Our
future results could be harmed by a variety of factors, including:



| |  | changes in foreign currency exchange rates;                                                                     
|- |  | ----------------------------------------------------------------------------------------------------------------
| 
| |  | changes in a specific countrys or regions political and economic conditions, particularly in emerging markets;
| 
| |  | potentially unfavorable tax rules;                                                                              
| 
| |  | tariffs, duties and other trade barriers;                                                                       
| 
| |  | reduced protection for intellectual property rights;                                                            
| 
| |  | challenges in managing widespread operations;                                                                   
| 
| |  | changes in foreign laws and regulatory requirements or in foreign policy; and                                   
| 
| |  | varying business practices in foreign countries.                                                                

CHANGES IN INDIAN TAX LAWS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

Our Indian software development and business process management operations
qualify for tax incentives associated with businesses which operate within
designated geographic locations. These incentives generally provide us with
exemptions from Indian tax on certain business income generated from these
operations and phase out through March 2009. We cannot assure you that these
tax benefits will be continued in the future at their current levels or at all.
For example, the Indian tax laws were changed, effective April 1, 2002 through
March 31, 2003, to subject 10% of our previously tax exempt income to a 35%
tax. If our Indian tax benefits are further reduced or eliminated, our taxes in
future periods would increase. Such an increase could reduce our profits.

WE FACE TERMINATION AND COMPLIANCE RISKS WITH RESPECT TO OUR GOVERNMENT
CONTRACTS.

All of our government contracts can be terminated at any time, without cause,
by the contracting governmental entity. We realized 9.4% of our net
sales (before reimbursed expenses) in
the first nine months of 2002 pursuant to contracts of this type. If a
government contract is so terminated, we are generally entitled only to receive
compensation for the services provided or costs incurred at the time of
termination and a reasonable profit on the contract work performed prior to the
date of termination. In addition, all of our government contracts require us to
comply with various contract provisions and procurement regulations, and in
some cases, accounting requirements. Violations of some of these provisions
could, if not cured, result in termination of the contract and fines.

There will be a decline in the revenues of the government services business in
2003 due to the expiration of existing contracts. We do not believe our
Medicaid eligibility verification contract with the state of New York will be
extended beyond December 2002. The approximate annual revenue from this
contract is $11.6 million. An EBT contract that generated $3.9

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million in revenue in 2001 is also scheduled to expire at the end of 2002.
Although we have obtained and continue to seek additional EBT contracts, these
new contracts will not generate sufficient revenues in 2003 to offset the
approximately $15 million to $16 million decline in revenues we will experience
due to the contract expirations described above.

We have been informed that Citibank has been awarded the EBT contract for the
Western States EBT Alliance (Arizona, Alaska, Colorado, Guam, Hawaii, Idaho and
Washington). We currently act as a subcontractor to Citibank for this alliance
and this relationship generated approximately $4.8 million in revenues
(excluding revenues derived from reimbursed expenses) in 2001. We expect that,
as a result of Citibank being awarded this EBT contract, our role as a
subcontractor will be discontinued. We do not presently anticipate that this
transition will have a material impact on our business in 2002 or 2003,
although our significant contracts for this coalition will begin to roll-off in
2004.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS.

Despite our efforts to protect our intellectual property rights, third parties
may infringe or misappropriate our intellectual property rights, or otherwise
independently develop substantially equivalent products and services. The loss
of intellectual property protection or the inability to secure or enforce
intellectual property protection could harm our business and ability to
compete. We rely on a combination of trademark and copyright laws, trade secret
protection and confidentiality and license agreements to protect our
trademarks, software and know-how. We have also applied for patent protection
on some of the features of our newer products. We may be required to spend
significant resources to protect our trade secrets and monitor and police our
intellectual property rights.

Third parties may assert infringement claims against us in the future. In
particular, there has been a substantial increase in the issuance of business
process patents, which may have broad commercial implications. Claims for
infringement of all types of patents are becoming an increasing source of
litigation. If we become subject to an infringement claim, we may be required
to modify our products, services and technologies or obtain a license to permit
our continued use of those rights. We may not be able to do either of these
things in a timely manner or upon reasonable terms and conditions. Failure to
do so could seriously harm our business and operating results. In addition,
future litigation relating to infringement claims could result in substantial
costs to us and a diversion of management resources. Adverse determinations in
any litigation or proceeding could also subject us to significant liabilities
and could prevent us from using some of our products, services or technologies.

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY OR PREVENT A
CHANGE IN CONTROL.

Provisions of our certificate of incorporation and bylaws and Delaware law may
delay or prevent a change in control of our Company that you may consider
favorable. These provisions include the following:



| |  | no cumulative voting by stockholders for directors;                                                                                                                                                                             
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | a classified board of directors with three-year staggered terms;                                                                                                                                                                
| 
| |  | the ability of our board to set the size of the board of directors, to create new directorships and to fill vacancies;                                                                                                          
| 
| |  | the ability of our board to issue preferred stock, without stockholder approval, with rights and preferences that may be
superior to our common stock;                                                                          
| 
| |  | the ability of our board to amend the bylaws;                                                                                                                                                                                   
| 
| |  | a prohibition of stockholder action by written consent;                                                                                                                                                                         
| 
| |  | advance notice requirements for stockholder proposals and for nominating candidates to our board;                                                                                                                               
| 
| |  | restrictions under Delaware law on mergers and other business combinations between us and any holder of 15% or
more of our outstanding common stock;                                                                            
| 
| |  | a requirement that 66-2/3% of our stockholders and 66-2/3% of our directors approve certain corporate transactions,
including mergers and consolidations, sales of assets or amendments to our certificate of incorporation; and

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| |  | we have adopted a stockholder rights plan, which discourages the unauthorized acquisition of 15% or more of our common
stock or an unauthorized exchange or tender offer.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

The following exhibits are filed as part of this amended report:

|            |  |                                       |  |                 
|----------- |  | ------------------------------------- |  | ----------------
|Exhibit No. |  | Description                           |  | Method of Filing
|            |  |                                       |  |                 
|99.1        |  | Written statement by Paul F. Walsh    |  | Filed herewith  
|           
|           
|           
|           
|99.2        |  | Written statement by Thomas S. Liston |  | Filed herewith  



---

|* |  | Incorporated by reference
|- |  | -------------------------
| 
| 
| 
| 
|  |  | (a)   Reports on Form 8-K
| 
| 
| 
| 
|  |  | None                     

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                        |  |                                                                       
|----------------------- |  | ----------------------------------------------------------------------
|                        |  | eFunds Corporation
(Registrant)                                       
|                       
|                       
|                       
|                       
|                        |  |                                                                       
|                       
|                       
|                       
|                       
|Date: November 29, 2002 |  | /s/ Paul F. Walsh

Paul F. Walsh,
Chief Executive Officer and Chairman

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CERTIFICATIONS

I, Paul F. Walsh, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of eFunds
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared:

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                        |  |                                                                               
|----------------------- |  | ------------------------------------------------------------------------------
|Date: November 29, 2002 |  | /s/ Paul F. Walsh

By: Paul F. Walsh
Its: Chief Executive Officer and Chairman

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I, Thomas S. Liston, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of eFunds
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared:

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                        |  |                                                                                
|----------------------- |  | -------------------------------------------------------------------------------
|Date: November 29, 2002 |  | /s/ Thomas S. Liston

By: Thomas S. Liston
Its: Interim Chief Financial Officer

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Index to Exhibits

|            |  |                                       |  | 
|----------- |  | ------------------------------------- |  | 
|Exhibit No. |  | Description                           |  | 
|            |  |                                       | 
|99.1        |  | Written statement by Paul F. Walsh    |  | 
|           
|           
|           
|           
|99.2        |  | Written statement by Thomas S. Liston |  | 

37